You thought you were smart by avoiding credit in your early 20s. Now, you face the "credit catch-22": You need to build credit but with your limited history, you can't get approved for a credit card. Here are your options.

Let me ask you something: Are you doing enough to build good credit?

If you’re like an increasing number of our readers, you may find yourself well into adulthood without much of a credit history…or any credit at all.

That may be because you were being smart with money in the first place – avoiding credit cards in favor of cash and debit cards. After all, I’ve already told you about my tango with credit card debt in my early 20s.

Or perhaps building credit just wasn’t on your radar.

Either way, your avoidance of credit could be a problem as you approach new stages of life.

Fair or unfair, your credit history is a big factor people will use in deciding whether to do business with you. Banks use credit scores when deciding to lend you money for a car or home. Insurance companies use credit scores for pricing your car insurance policy. Some employers even check your credit before deciding whether to offer you a job.

The most common scenario I see is that, one day, you decide it’s time to get a credit card. Maybe you’ve never had one, or maybe you opened one a long time ago and forgot about it.

Maybe you want to start earning rewards on your purchases, perhaps you need one to pay for work-related travel, or maybe you just decided it’s time to start building credit.

So you apply for a credit card. And you’re declined.

Then you try another card. Declined again.

You’re on your way to discovering another unfortunate reality of credit: Sometimes, having NO credit is worse than having bad credit.

What can you do about it?

Basically, you’ll need to figure out how to get a credit card for limited credit history that will approve you. Now’s the time to recognize that you may not get the kind of card you had your eye on. The credit cards designed for people with short credit histories sometimes do not have rewards programs, may come with lower credit limits, and some have annual fees.

So why bother?

Well, if you pay your bills on time, any credit card will help you build a good credit history (even if you’re starting from zero). So even if you were denied before, don’t give up on getting a credit card. The sooner you do, the sooner your credit history will start to grow.

And credit grows slowly: It takes between one and two years of timely payments to get an above-average credit score and can take 10 years or more to begin to approach really excellent credit.

How to get a credit card with limited credit history

Step 1: Check your credit

It’s a good habit to check your credit report and score before you apply for any kind of credit card or loan. You want to:

  • Know your credit score so you can apply for the best possible offer that will accept you and
    Make sure there aren’t recent errors or fraud on your credit report

Fortunately, free services like Credit Karma make this easier than ever. It takes about 10 minutes to check your credit, and it’s totally free.

Step 2: Review available credit cards for limited credit

On this page we list some credit cards that are available to applicants with fair credit.

Here, you’ll notice a few things.

The APRs are fairly high.

If you get a credit card designed for people with limited credit, you do NOT want to use it to pay for something over time. The interest rates on limited credit credit cards are 20% or more. This isn’t necessarily to take advantage of you, it’s to protect the bank: Lending money to someone with no credit is a lot riskier than somebody who has paid on time for 10 years. In order to account for that risk the bank prices their cards higher.

Some cards have annual fees.

The annual fees on the credit cards for limited credit that we recommend are mostly reasonable: Most are between $20 and $40 a year with a few that charge up to $99.

If you have absolutely NO credit at all, you may be looking at paying for a card with the higher fees if you want to be approved.

What you want to avoid, however, are “bad credit” credit cards that are marketed elsewhere. Although the Consumer Financial Protection Bureau is cracking down on some of these cards’ practices, it’s not unusual to see a credit card for bad credit with a $200 or $300 annual fee. The kicker is these cards only come with a $300 or $500 credit limit, which is immediately reduced by the annual fee. Stay far away.

Step 3: Choose a credit card and apply

On Money Under 30, we make it a bit easier to gauge your chances of getting approved for a particular credit card. On most of our recommended cards, we provide the average approved credit score and lowest approved credit score. (This information is just below the card name and above the card picture).

Although credit card companies take other factors besides your credit score into account, this data can be a guide. If your score is around or above average, consider it safe to apply. If your score is near or below the minimum, keep looking.

Once you’ve found a card, applying online is easy and most cards will give you a decision quickly – sometimes instantly, sometimes within a day or two.

If you’re approved, congrats! Going forward, use the card for a routine expense (let’s say gas) and get into the habit of paying off the balance in full and ON TIME every single month. Each time you do, you’re knocking your credit score in the right direction.

Keep monitoring your credit score, and in a year or two you may be able to apply for a credit card that offers more generous rewards or a lower annual fee.

Were you declined?

OK, don’t panic yet.

Step 4: Consider a secured credit card

Many times, consumers with absolutely ZERO credit history cannot get approved for any traditional credit cards. The banks simply won’t take the risk on an unknown entity.

So how can you start to build credit if you can’t get credit?

Good question.

Enter the secured credit card.

A secured credit card looks and works like any other credit card. The difference is that a secured credit card requires a security deposit.

It’s no different than when you rent an apartment and the landlord requires a security deposit or last month’s rent.

When you get a secured credit card, you must make a deposit into a bank that the credit card company controls. That deposit becomes your credit line, and you essentially borrow the money from yourself.

But isn’t that like a debit or prepaid card?

Yes, it is. But the difference is that instead of depositing and withdrawing money from a debit or prepaid card whenever you want, you make charges against your deposit monthly and then repay the balance every month.

Essentially, secured credit cards are designed to test your ability to make a responsible on-time payment month after month. That’s it. The good news is, most banks will upgrade your card to a regular, unsecured credit card after a year or so of responsible use – just call and ask.

You can learn more about how secured credit cards work here or view our recommended secured credit cards.


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