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Opening a credit card is one of the quickest ways to start building a credit history. But qualifying for a new card can be challenging if you don't have an established record of managing credit accounts or loans.
You might not have a credit history if you've never had a credit card or loan before, or if you've borrowed from lenders who did not report the account activity to the three credit bureaus (Experian, TransUnion and Equifax). You might also lack a credit history if you had an account many years ago that has since been removed from your credit report, and you haven't applied for any credit since.
But even without a credit history, you may be able to qualify for certain types of credit cards that will help you establish a record of responsible money management and on-time payments—which will work toward building a good credit score.
Card Options for Those Without a Credit History
A secured credit card is a good option for building credit if you don't have a credit history because the criteria for opening an account are less strict than with a standard unsecured card. With a secured credit card, you put down a refundable deposit to guarantee your account. The amount you'll be required to deposit varies based on the card issuer and credit card.
The deposit reduces the card issuer's risk, because they can use your deposit to cover what you owe if you default on the account. If you manage the card responsibly by making your payments on time each month and keeping the balance low, you may build a credit history that will eventually qualify you for an unsecured card and a higher credit line.
Depending on the secured card you choose, your deposit may serve as your credit line. For example, if your deposit is $350, that's how much credit you'll have available. Once the account is open, you can make purchases, pay down the credit line and repeat the cycle just as you would with any credit card.
Secured credit card issuers offer varying credit lines, may or may not charge an annual fee and other fees, and may or may not report to all three credit bureaus. That's why it's important to research several cards before submitting an application.
Here are a few secured credit cards that report to all three credit bureaus and can help you build your credit:
- Discover it® Secured: Secured cards typically offer few if any rewards, but the Discover it® Secured is a notable exception: It offers cash back on all your purchases, and even matches all the cash back you earn your first year as a new cardholder. Charging no annual fee and few other fees, the Discover it® Secured is one of the best secured cards for building credit.
- The OpenSky® Secured Visa® Credit Card: This secured card offers two major perks to people with little financial and credit history: It doesn't require a credit check and doesn't even require you to have a bank account. The The OpenSky® Secured Visa® Credit Card allows you to set your own credit line based on your deposit, though there is a $200 minimum. The annual fee is on the lower end, at $35 per year.
- Secured Mastercard® from Capital One: The required deposit for the Secured Mastercard® from Capital One is $49, $99 or $200 depending on your credit history and other factors; your initial credit limit will be $200. You may be eligible for a credit line increase with no additional deposit in as little as six months based on your account activity.
If you're not sure which secured card is right for you, Experian CreditMatch™ can give you personalized recommendations to help you get started with building your credit history.
How to Establish Credit
Once you've opened an account, there are several steps you can take to build credit with your new card:
- Make all payments on time. Your payment history is the biggest factor in your credit score, and one of the most important elements lenders look at when deciding whether to approve you for a credit card or loan. Ensuring that you make payments by the due date every single month can help you steadily increase your credit score.
- Keep your account balance low. When you max out your credit line, it can appear as a red flag as far as your credit risk is concerned. Since your credit utilization ratio is the second most important factor in calculating your credit scores, your credit account balances can make a big difference. Keeping your balance low, or ideally paying it off every month, demonstrates strong money management skills and can help improve your credit scores.
- Use the card consistently. You're trying to create a record of on-time payments and smart debt management, which you can do by using the card regularly. Putting expenses such as groceries, take-out meals or even small bills on the card each month, and then paying the balance off, allows you to show consistency in your financial behaviors.
- Ask for a credit line increase. Credit card issuers sometimes raise your credit line automatically if you've been paying your bills on time and have kept your balance low. But you can also request an increase after several months of on-time payments. A higher credit line gives you more wiggle room to better keep your balances at 30% or less, which improves your utilization ratio and can raise your credit scores.
- Take out a credit-builder loan. With a credit-builder loan, you won't receive any money upfront. Instead, your lender deposits the loan amount into an account for you, and you make payments toward the loan each month. Once you've completed your payment term, you gain access to the funds. The lender will report those payments to the three credit bureaus, which add them to your credit files helping build your credit history.
- Become an authorized user on someone else's account. When you become an authorized user on a credit card account, that credit line and payment history appear on your credit report. If you have a close relative or friend who manages their credit well and makes payments on time, this can be a great option for getting some positive activity on your report. However, if the main account holder is late with their payments or charges up high balances, being an authorized user won't help you.
Tips for First-Time Credit Card Users
Perhaps the best thing you can do as a new credit card user is to not bite off more than you can chew. In other words, keep purchases small so you know you'll be able to pay your bill in full each month. Not only does this keep your credit utilization ratio low, it also helps you avoid paying interest.
When you have a high balance with a high interest rate, the amount you owe can escalate quickly and become unmanageable. Being mindful of your budget may save you money and help you build an excellent credit score.
If you can't pay off your total balance, still make an effort to pay more than the monthly minimum. While you'll still pay interest, you'll owe less than you would if you only paid the minimum. The bigger your payments each month, the more you will save.
Because paying your bill on time is essential, consider paying early if you're able to, which may give you peace of mind knowing that you don't have to worry about late fees and negative remarks on your credit report. If you're worried you may miss payments, consider setting up autopay; just be sure you have enough money in your bank account to cover the payment each month.
What to Do if You're Denied for a Credit Card
If you're denied for a credit card, look out for a letter from the lender. Under the Fair Credit Reporting Act, lenders are required to tell you why they turned down your application in what's called an adverse action letter. You also have a right to a free credit report from the credit bureau the lender used to evaluate your credit. To get your free credit report from Experian, go to our Denied Credit page. The information in that letter can help you identify areas to work on to build your credit.
You can also call the lender directly and ask a specialist for more insight into the denial. If you believe you have a case for being approved, you may be able to ask the specialist to reconsider the decision.
Barring a reversal, remember that there are other options for building credit, such as becoming an authorized user or opening a credit-builder loan. Experian Boost™† can also help you by pulling in data from on-time payments on your utilities, phone and even streaming services such as Disney+™, HBO Max™, Hulu™ and Netflix® to increase your credit scores powered by Experian.
Monitoring your credit and knowing the types of activities that may appear on your report is key, because you want to make sure all the data is accurate. Even if you're denied for a credit card right now, seeking out opportunities to demonstrate responsibility and reliability can go a long way toward helping you qualify for quality cards in the future.