How to get a credit card when you have no credit
Accumulating credit in your college years can be smart and scary at the same time. It’s important to start building your credit so when the time comes, you can be approved to rent an apartment or buy a car. But it’s also difficult to responsibly take care of a credit card if you do not have a steady source of income or financial skills.
There are credit cards that are specifically set up to cater to a college student’s needs. Generally, these cards boast lower interest rates and do not charge an annual fee. For someone with little or no credit, like many college students, you may think that it is difficult to be approved for a credit card.
Jodi Kaus, the Program Director of Powercat Financial Counseling at Kansas State University, discussed with College News the difficulty students under the age of 21 may face when applying for a credit card.
“New regulations have made it more challenging for students to get a credit card if they are under 21-years-old. They must be able to show they have the ability to pay or they must have a cosigner to get a credit card,” she said.
Unfortunately, some credit card companies see college students as an opportunity to make money. It is easy for students to get caught up in credit card debt because of a lack of steady income. In addition, spending money that you don’t have or that isn’t necessarily yours is easy.
“It is very easy to get in over ones head with the convenience of using credit,” said Kaus.
The Business Insider warns college students to be “wary of cards targeted to students…sometimes it is a marketing hook used by banks trying to get students who don’t know any better to sign up for a card with a high APR and no substantial rewards.” APR, or Annual Percentage Rate, refers to the interest rate applied to a balance if it is not paid off immediately.
However, if you are ready for a credit card, there are things you should check before you apply. According to About.com, credit card companies will look at your bank account first to determine if you are a good candidate for a credit card. If you have a delinquent account or frequently overdraft your account, then you may be denied. They also look at your employment history. If you don’t have a job, or can’t seem to be able to hold a job at all, then chances are you won’t be able to pay your credit card debt.
Most importantly, credit card companies will look at any utilities that are in your name. While having a utility bill won’t necessarily help your credit, it can definitely hurt it if you were not on time with the payments. With a delinquent utility account, you will most likely be denied a credit card.
Jodi Kaus offers some advice before signing up with a particular card. “(Students) should speak with their bank about any available options, and may have to get a secured credit card where a bank account serves as the collateral for the credit line. But they should carefully analyze the fees associated with such a card before applying,” she said.
Having a cosigner on your credit card is another option students can employ. This allows the bank to feel more comfortable with granting you a credit card because there is another person who can pick up the bill if you cannot.
“Having a cosigner may be another option, however your cosigner will be fully obligated on the account as well,” said Kaus. This puts your cosigner at risk if you cannot pay off your balance, so have a frank discussion with your potential cosigner before he/she commits.
If you are unsuccessful in any of the things listed above, you can always acquire a department store card first and build up credit that way. However, remember, if you do not pay your bills on time with that card, chances are you won’t pay them on time for a credit card, and you may not be approved.