If you have yet to establish a credit history – perhaps because you’re young, or because you’ve recently had to clean up your history completely – and you need a credit card, you’ve probably run into a major obstacle.
Credit card providers want nothing to do with you.
Most lenders simply won’t approve people with no credit history, and that makes sense – they have nothing to go off of when evaluating your risk factor.
Your credit history is a window into your financial habits, and without one, you’re not trustworthy enough to get approved for credit or loan applications.
Whilst the obvious solution is to build up your credit history, the annoying fact is that getting approved for a credit card would be a step towards building up your history in the first place.
But that’s where secured credit cards come in.
What is a secured credit card and how can you get one with no credit history?
A secured credit card is opened by making a cash deposit. The cash deposit ‘secures’ the card, meaning that irregardless of the state of your score and history, as long as you have money to put down, you can get a secured credit card.
As for the amount of credit available (the limit), this is set by how much you deposit to secure the card. For example, if you only have $300 in cash, then your credit card limit will be $300.
However, having a credit card will not only help you make purchases you need to make, but as long as you’re paying it back on time, then it’ll also build up your credit history (positively) and thus boost your score.
Secured Credit Cards aren’t for forever
Most secured credit cards have the caveat of high interest rates and expensive annual fees.
Therefore, when you sign up for a secured card, you’ll want a game plan in place. Use it to build up your history, but don’t plan to use the card for the long term.
Making sure your account is in good standing
There’s no point in securing a credit card if you are going to spend credit that you can’t afford to pay back in full, and on time.
Whilst a credit card will help build up your history, you want your credit history to show lenders that you’re financially stable and responsible. In order to do that, you’re going to have to make timely payments.
When you’ve secured a credit card, make sure to check the payment agreement, and set yourself reminders to make payments. Better yet, you can automate payments to keep your credit card topped up.
Something else you’ll want to keep on top of: keeping your balance low.
Simply refrain from using too much of your available credit.
For example, if you were working with a limit of $800, you won’t want to use more than 10% of that at any given time (which is $80). A high utilization ratio (where your balance is above 30%) will make you look risky to lenders, as well as cause a drop in your score.
10% is a conservative utilization rate to stick to, and it’ll help to build up positive history, and increase your score, in the long run.
How do you get a secured credit card?
If you shop around, and ask different providers and banks, you’re bound to find secured credit card deals. Of course, they’re not all made equal. Some of them have more cons than pros (for e.g. very high interest rates and annual fees).
At Approved Credit Score, we’ve curated a long list of secured credit cards with reasonable rates, and fees.
As part of our Credit Building Program, you can have access to these secured credit cards, as well as Primary Accounts and Authorized Users (find out more about these, and how they build up your credit, here).
When you have no credit history, getting approved for all sorts of necessary financial applications becomes troublesome.
If you need help building up your credit history, and boosting your score (as fast as possible), then talk with Approved Credit Score today about what we can do for you.
Want to rebuild your credit ASAP? Consult with our experts for FREE, and ask about our Credit Building Program