Obtaining Credit Cards with No Credit – Secured Credit Cards
Obtaining Credit Cards with No Credit
Credit cards are very appealing to people for several reasons. Not only do they allow you to spend money without immediately draining your bank balance, but they also provide cash back rewards and other perks.
Many people, unfortunately, do not have the necessary credit score to obtain such credit cards. If you are a newcomer to the U.S. with no credit history in your home country, or you are recently out of high school, you probably have no credit score.
Credit card companies do not issue their best cards to people with no or low credit, which is where secured credit cards come into the picture. These cards are an option for people who are starting their credit journey, while they are also available to those who are rebuilding their credit after past mistakes.
What Are Secured Credit Cards?
A secured credit card is not the same as a regular credit card, as you must put in a deposit if you wish to obtain one. It is almost a hybrid of a debit card and a credit card.
Individuals apply for secured credit cards by entering their information on an online form or visiting the credit institution. By providing their details, they allow the card company to assess how much deposit the applicant must put down to obtain the card.
There are instances where a $50 or $100 deposit is enough to get $300 in credit. Some cases may require the applicant to put down a 1:1 deposit to their credit line. So a $250 deposit gets a $250 credit line.
The deposit is necessary to protect the credit card issuer. They are taking a risk on someone who has no credit or a very low score. If you end up defaulting on the full credit line, the company has your deposit, which mitigates or completely covers their losses.
Evolving From a Secured Credit Card
If you are only able to obtain a secured credit card, it is not such a significant issue. Many applicants are very disappointed, but the journey from secured to unsecured card is a lot quicker than you would imagine.
Most issuers of secured cards will give you a credit line increase within a few months of making regular payments. If you get a secured card from a major company that also offers unsecured cards, they may allow you to transition to such a card within six months or a year.
Each prompt payment you make on your secured card also helps boost your credit score. One tip for individuals who have a secured card is to keep their utilization ratio low.
If you have a secured card with a limit of $300, try to cap your spending on the card at $100 a month. Make payments in full and on time, and you should have an unsecured card with a much higher limit in six months to a year.
Are There Conditions For Secured Credit Cards?
Many applicants assume that because it is a secured credit card, everyone is approved. It is not the case, as companies still have some requirements that must be met.
A common requirement is a bank account, as companies do not want to give out credit cards to people who are unbanked. It is also necessary to have a U.S. social security number, while the issuer may also ask you to submit a picture of your driver’s license, state ID or student/work visa.
Such documentation is necessary to verify your identity and ensure the credit card issuer is complying with all federal and state regulations.
If you are a newcomer to the U.S. who has some credit history back home, you can leverage resources such as Nova Credit to transfer that information to U.S. credit card issuers. It may help you qualify for a better credit card.
Those who have no history would do well by browsing through a list of the top credit cards for applicants with no credit. Such cards may not have the appealing cash back or travel perks of American Express or Chase Rewards cards, but they are still a very good way to start on your credit journey.
Written by English Speeches