When used responsibility, credit cards are a good way to build credit, earn rewards and pay for emergency expenses. Unfortunately, there are few credit card companies willing to offer low interest rates to consumers with little or no credit. If you have no credit history, you can still get a low interest credit card, but you might have to be patient. Outlined below is a guide for how to get a low interest credit card when you have no credit.
*Identify your options. Start by visiting a website like CreditCards.com, which allows consumers to search for credit card offers by credit quality. Simply select the “Limited or No Credit History” option, to see which credit card offers are available to you. Most likely, the results aren’t going to represent the offers that you were hoping for, but they are a place to start and at least you’ll know what is available to you.
*Build your credit. The majority of credit card offers for people with little or no credit are going to consist of prepaid debit cards or secured credit cards. Prepaid cards basically work like a debit card does for your bank account. With a prepaid debit card, you can only spend up to the amount of what you’ve deposited in the account. Secured credit cards are similar. They require an initial deposit, which is considered “security” for the credit card company in the case that you don’t pay your bill. For this reason, your credit line is generally equal to the amount of the deposit.
Prepaid and secured credit cards might seem like a waste of time, but the are a viable way to build your credit. Just be sure that your monthly activity is being reported to all major consumer-reporting agencies. Also, secured credit cards are not known for offering low interest rates, so its best to pay off your balance in full each month to avoid paying interest charges. After six months to a year of consistent on-time payments, you may qualify for a traditional unsecured credit card, or at least the terms for your secured card may improve (hopefully without any additional deposits). Another way to build your credit is by taking out an auto or home loan and making regular payments. It might be slow-going at first, but this if unfortunately the way that credit works.
*Ask for help. Another way to get a low interest credit card when you have no credit is by asking a spouse or family member to make you a secondary cardholder on their account. This is a common practice for parents that want to help their teens build credit. Of course, this requires that someone you know trust you a great deal, and it may be a hard sell for many. You’ll also want to be certain that the monthly activity is reported to major credit agencies for both cardholders (which is usually the case).
You’ll get your own card and the interest rate depends upon the credit and card agreement of the primary cardholder. However, if both cardholders plan to continue using this account, you’ll need to come to an agreement on spending to avoid over-limit charges and you may be asked to fully disclose where you’re spending your money to the primary cardholder. This situation works well for parent-child relationships and for some spouses, but other family members may have difficulty working out this relationship.
Gone are the days when consumers with no credit were handed credit cards with low interest rates and high limits. Now, you’ve got to earn your credit and it isn’t easy. If you’re lucky enough to know someone willing to share their credit line, you’re somewhat ahead of the game, but if not, it will likely take some time to build up your credit to the point where you are awarded a low interest rate card. Get started today, be patient and sensible, and eventually your credit will be worthy of all kinds of attractive credit card offers.