How can I get a credit card with no credit?
December 17, 2010 9:14 AM   Subscribe

I need a credit card. I am 22, and have never had a credit card. I have no credit. What do I do?

I'm 22, and I've never had a credit card. I also don't have any student loans, mortgages, car loans, etc, so I don't have any credit history with the major credit bureaus. I have about $200 left in medical debt, and will pay that off by the end of January.

I've applied for an Amex and for a card with my Big Bank (rhymes with "Shitty"). I've been denied for both. I know that secured cards exist, where I have like a $250 limit and have to pay in advance, but those seem to be usurious and have tons of fees.

I have a decent, full-time job, and make in the low $30k. I am probably going to have to travel abroad for work this year, though, and I will need to have a card to put my flight, hotels, etc, on.

I've heard college student cards are easy to get. I still have a .edu email address. Can I get a student card? How bad is it to lie and say that I am still a student?

If this is a horrible idea, what are my options and how do I get a card?
posted by anonymous to Work & Money (24 answers total) 7 users marked this as a favorite
I'd suggest talking to local credit unions. They tend to be a lot more reasonable than the big banks about giving out cards to their members.
posted by zug at 9:16 AM on December 17, 2010

Most banks will issue you Visa debit cards which draws directly from your bank account. These can be used for flight, hotels, etc.

I travel a lot and cannot recall the last time I used a personal credit card.
posted by vacapinta at 9:17 AM on December 17, 2010

Credit union or department store (also, Target).

Sad to say-secured credit cards suck, but they might be your only option for the first year. After the year, call up the bank (or credit union), and get them to change to a real credit card.
posted by dinty_moore at 9:17 AM on December 17, 2010

You might have the best luck getting a non-secured credit but one that has a really low limit, an annual fee, and an outrageous APR. That's what I had to do after college- $300 limit, something like a 30% APR, and a $45 annual fee (after the first year, I threatened to cancel, and they dropped the fee). They also steadily increased the limit after the first few months so that it wasn't useless.

Don't know about the student card- doesn't seem like a terrible lie, but IANAL. And yeah, definitely look into a credit union too.
posted by thewumpusisdead at 9:19 AM on December 17, 2010

Local credit union or bank is your best bet. Bigger banks have stricter underwriting standards and less room for the loan officers to show individual discretion.

Also-going the student route is a non-starter. Recent legislation has severely curtailed the practice of giving credit cards to college students because students are generally personal finance novices and rarely have any income to speak of anyway.
posted by supercapitalist at 9:20 AM on December 17, 2010 [1 favorite]

Don't lie to obtain credit. I don't know what the laws are in your jurisdiction, but don't do it.
posted by smorange at 9:20 AM on December 17, 2010 [2 favorites]

While the fees are unavoidable, a ridiculous APR is... by ensuring you pay back, in full, what you charge every month.
posted by jangie at 9:31 AM on December 17, 2010

Do you have a parent that would co-sign on a card for you? Don't take it lightly, because they're responsible for the debt if you flake out. After using it for a while, and paying it off every month, you'll have built up some credit and can get your own.
posted by chrisamiller at 9:31 AM on December 17, 2010

A secured credit card is not usurious. You simply don't have actual credit - you pay them $500 and get a $500 credit limit. Other than that there are no fees any different from a regular credit card and the interest rate is the same. Check out US Bank's secured credit cards.

When they're willing to upgrade you to a regular credit card - in one or two years - you get the deposit back, possibly plus nominal interest.
posted by GuyZero at 9:45 AM on December 17, 2010

I'd combine the two suggestions of secured card + credit union. When I worked at a credit union, we offered one, and while I can't remember the details anymore it seems like it was a better deal than at other banks.
posted by GastrocNemesis at 9:49 AM on December 17, 2010

Department store or gas station card is one way to get a credit history that should help you get a real card you don't need too much lube for. I have an ExxonMobil card that I got nearly ten years ago, have used approximately twice, and costs me nothing. It nicely keeps up my credit history age, though.
posted by restless_nomad at 9:50 AM on December 17, 2010

Go to a credit union and set up direct deposit. They should be fine with giving you a credit card. Mine gave me one with no fee, low APR, and $500 limit, then increased the limit over the years. Never had any trouble. I don't know where you're from, but just google your city name and credit union and I'm sure you'll find a ton of them.
posted by Slinga at 10:02 AM on December 17, 2010

I'd consider your non-credit options for your travel plans. I understand the desirability of credit, in theory, but in practice the game is so thoroughly rigged against the consumer that I have to recommend that you not even play. If your travel is for work, see if your employer will make the necessary arrangements, including provision for emergencies; better yet, if you're traveling for work, your employer should issue a company card.
posted by Hylas at 10:07 AM on December 17, 2010

This book is very worth your time and money to read: Your Credit Score, Your Money & What's at Stake.

FYI, AmEx is generally pretty picky and requires a long credit history to get. I started my credit history at age 16 (with a secured card) and didn't qualify for an AmEx until age 28 even though I had a completely perfect payment history on everything. And lately they've even been cutting off long-time customers. So don't apply to them again (inquiries from declined credit applications ding your score a bit), wait for AmEx to come to you with a pre-qualified offer.

Start with a secured Visa or MasterCard and carefully build your credit from there.
posted by Jacqueline at 10:17 AM on December 17, 2010

My first credit card was secured, but this was around 1990. I don't know if fees and such have changed for secured cards. I was quite happy with mine and it helped me build credit in my early 20s. It wasn't a scam or usurious in any way.

I recommend a credit union. They may have options for secured cards and unsecured cards that might be more fair than a bank.

Another way of building credit is by getting a store card, such as Target. After having that for a few months, you can apply for a regular credit card.

And as someone suggested above, a co-signer isn't a bad idea, as long as you can pay your bill.
posted by xenophile at 10:31 AM on December 17, 2010

A friend of mine from Norway with no credit history in the USA started with a store card (Sears, I think ... he was buying a lot of tools at the time) and tried to charge something there every month. No fees. Paid it off monthly. After a year, the credit card companies agreed he had enough credit to give him a no-fee, unsecured card. (The APR may still have been high, but as long as you pay it off every month, that shouldn't matter.)

Several of his friends coming to the US from abroad have done the same thing; store cards are easy to get and don't typically have fees.
posted by Eyebrows McGee at 10:39 AM on December 17, 2010

Also, credit cards aimed at college students seem to have much lower standards for who they'ss accept. I applied for a citi MTVU card when I was a freshman in college (only because if you applied for the card you got free food) and was given one with I believe a $1,500 credit limit having never had anything but a bank account before then. It ended up being the credit card I've used ever since because it also has a perks program and now my limit is up over $6,000.
posted by kthxbi at 10:40 AM on December 17, 2010

Most banks will issue you Visa debit cards which draws directly from your bank account. These can be used for flight, hotels, etc.

I travel a lot and cannot recall the last time I used a personal credit card.

I would be really careful about doing this with the way you're going to be using it. When you use a credit card or debit card to check into a hotel, the hotel basically wants to make sure that, if you charge stuff to your room (room-service, PPV movies, Wi-Fi access, mini-bar, etc), they'll get paid. So they "reserve" an amount on your card for your intended stay and a little extra just in case. This temporary charge falls off after you check out and you only actually get charged for what you used. For a credit card, this is no big deal as long as it doesn't put you over your limit and you never actually see this charge unless you're paying really close attention to your credit limit. On a debit card, you'll see the transaction as "pending" on your account and it will detract from your available balance. Again, as long as this and your other transaction don't put you in the red, you're fine.

Lets say that you're going to stay someplace for two nights at $150/night ($300 total) and you have $500 in the bank. You check in and the "reserved" amount shows up for $400 (this should be about what you would expect). You go out and make some purchases for a total of $150 on the first night and don't spend any other money. When those transactions get processed the next day (go from pending status to posted), the bank will see that you have a $100 available balance and you'll get an overdraft fee. After you check out, the $400 drops off and you get charged the $300 you actually spent but the damage is already done.

Bars will usually do the same thing when you open a tab. 95% of the time, no one ever notices and it isn't a big deal but if you're not expecting it, it can be hard to understand why your account was over-drawn even though you didn't spend more than you had.

Now, as to the OP's question I have a couple of ideas.

1. I had a secured card for one year when I was younger. I deposited $1,000 with the credit card company and had a $1,000 limit. I paid the annual fee of $18 while my $1,000 collected interest and I used the card for almost every purchase and paid it off in full every month. After a year, I kept the card with the same limit and got my $1,000 back and they dropped the annual fee. I now had a regular credit card just like everyone else. It worked great for me.

2. The other thing I've heard is that there is a little loop-hole created with "authorized users". If I have a credit card, I can call up the credit card company and have you listed as an authorized user. They send you a card with your name on it but the same account number. You can use the card just like its yours but I'm responsible for the account. The trick is that the account shows up on your credit history exactly as it shows up on mine. To the credit bureau, it looks like the card is yours.

If one of your parents (or a really, REALLY good friend) has a credit card that they've had for a long time (the longer the better) and have always made their payments on time, you could ask them to have you listed as an authorized user on their account. It doesn't matter if you use it or not but it does give you some instant credit history.

It gets to be really fun if you use a parent's account that they've had for a long time. Mrs. VTX's credit report shows the card her dad added her to as an authorized user when she went to college so she could use it in emergencies. The credit report shows that she has had the account since 1980 but she was born in 1982!

If you've got the time to go through the hassle and allow a couple of months for the account to show up on your credit report before you finally try to apply for another account, this might work for you. Just be aware that, even if you don't have the card, you are still authorized to use the account and the only control the account owner has is that they can remove you as an user, they can't prevent any transactions before then so the potential for you to screw the account owner is pretty high.
posted by VTX at 10:47 AM on December 17, 2010 [2 favorites]

Note that you will likely get turned down for a store card of any kind with essentially no credit history, and being repeatedly turned down for credit dings your history too. Definitely find a local credit union and get a secured credit card. Use it responsibly, paying off the full balance every month. This means you won't build up debt, shows you are a good risk, and you won't have to pay any of those ridiculous fees. Yes, its annoying to have to hand over the secured money up front, but that's unfortunately the price of starting from scratch to build up a credit history. You have to suck it up for a while, but it quickly gets better and you can get a real credit card, probably from the same credit union. You can still use the secured credit card everywhere an unsecured one is accepted, they look the same to a store. Your limit will be really low though.

I moved to the US from the UK 11 years ago. I had a stellar credit rating in the UK, which was worth nothing here, so I had to start from scratch all over again. Having no credit history in the US actually makes you a worse risk than someone who is bankrupt. No credit history makes you the worst of the worst. I sucked it up and took a car loan at 14.5% APR, even though I could have bought the car outright. I paid it off within a year, rather than the 5 year terms. I got a secured card from a credit union. I had to pay extra deposits on my rental apartment, the power, phone and gas service etc. Within 18 months my credit rating was good enough that I was able to buy a condo. You can do it, but you have to be willing to pay the price at first.
posted by Joh at 11:06 AM on December 17, 2010

Do you have a checking and/or savings account? The bank where you have these accounts probably issues credit cards (in addition to debit cards). Go in to the bank and explain your situation to a live person, if at all possible. If you have any kind of a good history with these people, then they may be more likely to work with you, whether it's a small local bank or a large one.

Also, I've heard that Discover has lower standards than other card issuers; the Discover won't help you much for travel abroad since it's accepted mostly in the US, but it will help you establish a credit history.

Don't go around applying for credit cards willy-nilly, though, because those inquiries show up as negatives on your credit report.

You might want to try using the website CreditKarma - they check your credit score, then banks advertise cards and accounts to you based on your credit score. So you might get a better idea of what you would actually qualify for.

Oh, and! I recently read that when you apply for loans online, some banks take what browser you're using into account as part of their decision process. Chrome is the browser of the trustworthy borrower, apparently.

(Also, I agree with VTX - using a debit card is in some ways less desirable than using a credit card. I had my VISA-branded debit card stolen a couple of years ago, and if it had been a credit card it would have been just been a PITA, but since this card was withdrawing money from the account where I keep the money for my rent and student loans and other non-negotiable expenses, it was a scary PITA. That said, I have colleagues who don't have or use credit cards, and they still manage to travel for business, at least occasionally.)
posted by mskyle at 11:10 AM on December 17, 2010

Seconding mskyle. I went into the bank where I have a checking and savings account this summer and got a (student) Visa with a $3,500 limit and no annual fee. A real live person can tell you which cards you're most likely to be approved for, and answer questions like whether you have to be an enrolled student for a student card. My only credit history is federal student loans I have yet to make payments on. My bank is Chase, fwiw.
posted by MadamM at 11:24 AM on December 17, 2010

"I've heard college student cards are easy to get."

Marketing to students has dropped off considerably since laws started requiring proof of income. I do still get offers from via alumni foundation, so if you like credit card junk mail make sure your contact info is up to date.

But here's the deal: Amex is way too high end for you, and Citi doesn't exactly need more risky loans right now.
posted by pwnguin at 11:24 AM on December 17, 2010

mskyle: "Oh, and! I recently read that when you apply for loans online, some banks take what browser you're using into account as part of their decision process. Chrome is the browser of the trustworthy borrower, apparently"

This has been debunked -- they're A/B testing rates by randomly assigning visitors a rate. It's sticky until you switch browsers.
posted by pwnguin at 11:27 AM on December 17, 2010

You don't want a college student card, but you might be able to get an alumnae/alumni card, by virtue of being an alum. That's how I got my first one (in 2003 or 2004.) I don't know how much has changed since then, but I couldn't get a store card (that's how you built credit in the 70s) and secured ones seemed icky to me.

I managed to upgrade to a real card a bit later, but I keep my older card to maintain the credit history and keep it 'active' by letting one monthly recurring charge go on it.
posted by cobaltnine at 11:47 AM on December 17, 2010

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