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Do your homework when shopping for your first credit card

By Karen Price Mueller

Opening Credits
Columnist Karin Price Mueller
Karin Price Mueller is an award-winning writer with a specialty in personal finance.

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'Opening Credits' stories

Question for the CreditCards.com expert

Dear Opening Credits,
I wanted to know how can I apply for a credit card and get one without a credit history? -- Starting Out

Answer for the CreditCards.com expert

Dear Starting Out,
Sounds like you have a clean slate, having never before used credit.

You don't say how old you are, so I'm going to assume you're just starting out in your credit life. You can't get a credit card in your own name until you're 18, which is when you're old enough to be legally bound to a contract. I'm also going to assume that you have some income.

To make sure you have the clean slate we think you have, start by checking your credit reports for free at AnnualCreditReport.com.

If you have never used credit, it's possible nothing will come up under your name. But before you apply for credit, it's smart to make sure no one else has fraudulently tried to use your name or Social Security number to obtain credit. If you do find a problem, there's information on this site about cleaning up mistakes on your credit report.

Next, open up a checking or savings account with your local bank if you don't already have one. Even if your account doesn't have a lot of money in it, or if you don't use it often, lenders see having an account as a sign of fiscal stability on your part.

Now that you've set up the basics, it's time to start shopping for a card. There are thousands of credit cards out there, so it can be confusing to decide which is best for you. You should look for one with the lowest possible interest rate and no annual fee. Here at CreditCards.com, we've got plenty of options, including student credit cards and prepaid credit cards.

In this economic environment, lenders are being extra cautious about extending credit. They want to do everything in their power to take on as little risk as possible, so those with good credit histories, including on-time payments, are sure to get the best deal. That may make your job of finding a card a bit challenging. If you apply for a card and you're denied, there are other options:

  • Piggybacking: Piggybacking is when you essentially borrow someone else's good credit history history. Here's how it works: Cardholders with good credit allow someone with no credit -- such as yourself -- or someone with bad credit, to be an authorized user on their credit cards. Then the positive history of that account is reflected on the new user's credit report, regardless of whether they ever use the account. This boosts their scores and makes it easier for them to get their own credit in the future. Another possibility is to be listed as a joint account holder. But remember, with piggybacking, your credit mistakes will become your parents' credit mistakes, just as their mistakes will become yours. If you're not confident that your parents use credit responsibly, it won't do you any good to share a credit history with them.
  • Getting a co-signer: Perhaps a parent or someone else with good credit would be willing to co-sign your application for a credit card. If you pay on time, you'll build a good credit history. But if you don't pay on time or you completely ignore your bills, the co-signer will be held legally responsible for your charges -- and negative marks will end up on both of your credit reports.
  • Taking advantage of student offers: College students get plenty of credit card offers, even if the student doesn't have any income. The flood has slowed in today's credit crunch but hasn't stopped, and lenders are betting that parents are supplying kids with cash while they're in school. If you're still in school, you can probably find offers at your dorm, student center or elsewhere on campus. Or check CreditCards.com's student credit card offers.
  • Getting a secured cards: Secured credit cards pose no risk to the lender. As the borrower, you deposit money in an account held by the lender and you'll get a credit card with a spending limit equal to your deposit. The lender knows if you don't pay, it can access the bank account to be repaid. If you go this route, make sure you apply for a card that reports activity to the credit bureaus so you can establish a positive credit history. To learn more about secured cards, check out CreditCards.com's prepaid credit cards section.

Whatever kind of card you start out with, you have it in your power to create for yourself an enviable position: a solid, clean credit history with a good credit score. Don't charge more than you can pay, and try to pay in full so you don't face interest charges. And make sure to pay on time, even if you can't pay in full.

See related: Consumers, credit bureaus wrestle with thin-file problem, Cleaning up mistakes on your credit report, Piggybacking gets clemency from FICO, Piggybacking: When should the credit free ride end?, Crisis survival tips: Pay down debt and more, Credit crunch survival guide, Secured credit cards help rebuild your credit

Karin's money makeover column "Get With The Plan" can be seen every Sunday in "The Star-Ledger" and "The Trenton Times." She also hosts and writes "Money 911," a multimedia series for MSN Money. Before writing became her main focus, Mueller was the executive producer of CNBC's The Money Club, where she led the team that won the network's first ever Cable ACE Award for Business and Consumer Programming. Mueller lives in New Jersey with her husband, three kids, one guinea pig and one leopard gecko. Whatever they don't eat goes into her retirement savings accounts. A comprehensive archive of her writings is available on her Web site, www.KarinPriceMueller.com.

Send your question to Karin.

Published: December 24, 2008



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Credit Card Rate Report

Updated: 11-28-2014

National Average 14.98%
Low Interest 10.37%
Balance Transfer 12.73%
Business 12.85%
Student 13.14%
Reward 14.93%
Cash Back 14.94%
Airline 15.46%
Bad Credit 22.73%
Instant Approval 23.33%

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