It’s graduation season! Now that high school students will be leaving in the fall for college! It’s an exciting time for them, and for their parents. But for many of them, they haven’t really been taught about building credit. And the question on their minds is…which are the best starter credit cards for people with NO credit?
What credit card should I get?
When choosing a starter credit card, there are two main categories. Secured and Unsecured.
Option #1 Secured Credit Cards
1. Secured credit cards – these credit cards require a security deposit that becomes your credit limit. These are great for building credit because:
- They offer guaranteed approval.
- They will report your payment activity monthly, usually to all 3 credit reporting agencies and
- They can act as a savings account for you.
What I mean by that is that after a year of on-time payments, they will become unsecured. And the issuing bank will RETURN your deposit to you.
Sometimes with interest!
So this type of starter credit card will help you to build your credit AND your savings account!
- By finding the right card, you can find a secured credit card with a low interest rate. We have a list of secured credit cards with their interest rates listed here.
Secured credit cards are how I’ve started all my family when it came time to teach them about building credit and they needed their first credit card.
The one I recommend to everyone is the Applied Bank® Secured Visa® Gold Preferred® Credit Card. I like it because it allows you to ADD to your deposit over time. So you can build a line of credit up to $5000.00! That looks GREAT on your credit report and makes
Option #2 Unsecured Credit Cards
2. Unsecured credit cards – these starter credit cards are used by our clients that DO NOT have the ability to come up with a security deposit for the secured credit card.
These cards do NOT require a security deposit and will usually give you a credit limit of $300- $700. Interest rates vary depending on the card and they may have a fee they charge which they automatically charge to the card.
They will generally report to all 3 credit reporting agencies. Thus helping you build credit. They also have an easy approval process.
But not all of them are guaranteed approval. Please read the requirements before you apply. You can see our list of unsecured credit cards our clients use for credit building here.
Choosing a beginner credit card(s)
Both methods I described above are great ways to start building credit. It’s up to you which one you choose. But when choosing your first credit card, keep the following in mind.
- You want to choose a credit card that uses a SOFT inquiry. What that means is that it WILL NOT have an impact on your credit score. A HARD inquiry (most common type) will drop your credit score by a few points. If you are applying for several credit cards, its best to apply at the same time. That way you lessen the impact the hard inquires will have on your credit score.
- You want to make sure it reports to at least 1 credit reporting agency. Experian, Equifax or Trans Union. Its best if they report to all 3 but having at least 1 will help you to build credit.
- You want to be a responsible credit user. You want to keep your credit usage BELOW 35%.
- If you can, pay off your credit cards at the end of the month.
- You want to practice good credit habits. That means paying on time EVERY TIME. Even if it’s just the minimum payment
How to build credit without a credit card
Another way to build credit WITHOUT actually having to get a credit card is to ask a parent, friend or family member to add you as a signer to one of their credit cards with age, large credit line, and good payment history. The benefits to you are:
- you add an aged line of credit to your credit report.
- you add a large line of credit to your credit report
- you add payment history to your credit report
Your friend or family member DO NOT need to give you access to their credit card! Many people may hesitate to allow you to use their credit to BUILD your credit.
But if you advise them that it WILL NOT impact their credit score, you won’t have a card so you won’t be able to purchase things using that card, and it will help you to start building your credit in the best possible way. You may be able to use this method to build your credit WITHOUT having to open a credit card account.