How do I get a credit card if I have no credit history?
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It’s the classic catch-22. You can’t build credit without having credit, and you sometimes can’t get credit as a student without a credit history. So where do you start?
Nowadays, credit is required for almost everything from getting a cell phone, to renting an apartment and applying for a car or student loan. Fortunately, one of the best times to build credit is when you’re still in school. Here’s what you need to know when applying for your first credit card.
Apply for a student credit card
Your credit score is made up of a variety of factors. One of the most important factors is your credit history. If you are a student with a limited credit history, or currently have no debt or credit, you may not have a credit score because the credit bureaus have no way to gauge your ability to repay loans or pay your bills on time. However, contrary to what you may think, one of the best ways to build your credit history is to apply for and responsibly use a credit card.
“As a student applying for a credit card, you should be focused on using it responsibly to build your credit history,” says Christine Forman, a marketing director for Discover. “Handling credit responsibly now could help you to get lower interest rates in the future.”
Find the best credit card for you
It’s important to keep in mind that not all cards are the same. Each credit card comes with different rates, features, benefits and fees. If you plan to pay your balance in full every month, look to maximize your rewards with a student rewards card. With some student rewards cards, you can earn cash back on every purchase and more. Rewards caps or other exclusions may apply. If you think you will carry a balance, it’s important to look for a low interest credit card. Several student credit cards offer a 0% APR introductory offer for 6-8 months. This will help you pay off large purchases over time and avoid paying interest during the introductory period. Make sure to research all of your options to find a card offering the most benefits like a low interest rate, no annual fee, cash rewards and a reasonable credit limit. You should also pay close attention to the billing cycles to make sure you understand the payment policies so you can avoid any potential fees. Many student credit cards also offer free online financial tools to help you track and manage your spending.
“Discover has two student cards available—Discover it® for students and Discover it® Chrome for students—that both offer reward programs,” says Forman. “The Discover it® chrome card for students gives 2% cash back at gas stations and restaurants up to $1,000 in combined purchases each quarter automatically and 1% cash back on all other purchases, while the Discover it® card for students earns 5% cash back in rotating categories each quarter up to the quarterly maximum when activated and 1% cash back on all other purchases.”
Getting approved for a credit card
Typically, you must be at least 18 to apply for a credit card. If you are under 21, to get approved for a credit card, you must provide proof of your independent income or assets to show that you will be able to repay the amount you charge. Otherwise you will need to become an authorized user on your parent’s, guardian’s or another adult’s account who is over the age of 21. If you have a job, even if it’s part-time, you may have enough independent income to get approved for a student credit card on your own. However, it’s important to remember that it will be your full financial responsibility to pay the credit card bill every month.
Authorized credit card user
If you are added as an authorized user on another person’s account, you can enjoy the benefits of using the card without the official financial responsibility of paying the credit card’s balance. In some cases, if you have an insufficient credit history or bad credit, becoming an authorized user can help you build credit because the account history may be reported on your credit report. But ensure that the person liable on the account keeps up with payments because negative reporting to the bureaus will appear on your credit report if you are an authorized user.
Secured Credit Card
When a traditional card is not an option available to you, a secured credit card 1 can be a great solution to building the credit history you need to ultimately obtain a traditional credit card. A secured credit card requires that you put down a deposit. After that, the card works similarly to a traditional credit card and unlike prepaid or debit cards, allows you to build credit because your activity is reported to the credit bureaus.
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Check with the issuer
If you are or planning to be added as an authorized user to an account to build your credit history, make sure to check with the issuer and credit bureaus to ensure the account is being reported on your credit report.
Learn to use your credit card responsibly
A credit card is a great financial tool to help you manage your money and build a budget. Avoid over-spending by only making small purchases you are able to pay for, and make sure to pay off the balance each month. To avoid missing a payment, make sure to sign up for email or text reminders and enroll in automatic bill payment to ensure you pay on time. This is a simple way to improve your credit by establishing a history of paying on time.
“A simple way to improve your credit is by establishing a history of paying on time every month,” says Forman. “Avoid missing a payment by signing up for email or text reminders and enrolling in automatic bill payments.”
See why the Discover it® Chrome Student card can help you build your financial foundation, earn rewards, and take advantage of other tools such as the Spend Analyzer, which breaks down monthly purchases into categories for quick insights into your spending patterns. If you’re a road-trip warrior, the Chrome Student card’s cash back on gas and restaurants can be particularly helpful.