Those with No Credit - NerdWallet

Those with No Credit

If you have no credit, you’re slightly better off than someone with bad credit, but only slightly. Banks aren’t likely to want to assume the risk of lending to you, so you’re generally limited to secured credit cards. You should focus on building up enough of a payment history to move on to unsecured credit cards.

Secured credit cards: A secured credit card allows you to borrow money you don’t have, but you need to post collateral upfront, usually equal to your credit limit. You may also need to pay annual fees. However, your interest rate should be lower: below 10% isn’t unheard of. On-time payments are reported to credit rating agencies, so using the card responsibly will establish a good credit score.

Young adult credit cards: A number of small community banks and credit unions, as well as a few bigger banks, offer a young adult card to help youth, though not necessarily students, build up their credit scores. If you’re under 21, you’ll need a co-signer automatically. If you’re over 21, you’ll need a co-signer unless you have a source of income. You can piggyback on your co-signer’s good credit score to build up your own.

Immigrants: Capital One has a special card for immigrants: the Capital One for Newcomers. It’s meant for people who had a good credit history in their previous country but started with a blank slate in America. The card earns 1% rewards and waives its foreign transaction fee, a nice perk when traveling abroad.

How to build up your credit score: The best way to establish a good credit score is build a solid payment history with a credit card, generally a secured card. In moving your score up from no credit to good or even excellent credit, the most important thing to do is to pay off your bills each month. Incurring a little bit of debt every once in a while will move you from excellent to really excellent credit, but don’t worry about that for now. Please see our tips on how to raise your credit score.

While there are only a few ways to build up your credit score, there are any number of ways to ding it. Missed payments, bankruptcy and excessive debt are the most obvious, but you can also be marked down for missed rent or utilities payments. Unfortunately, on-time bills don’t raise your score, and can only lower it.

Debit cards, even prepaid debit cards, do not affect your credit score at all. If you get a prepaid debit card, you’ll end up paying a lot of fees you don’t need to, without helping yourself move upward.

  • daryle bollucks

    Can the southwest card be paid online with my current bank account if I don’t have a Chase checking account?

    • NerdWallet

      Yes, you should be able to pay from most banking accounts.

  • Credit Card Benefits

    Thanks for this full fledged details regarding credit card and banking account process

  • Joe

    The Fidelity Amex gives you 2% back on everything. The catch is that the rewards must go into a Fidelity account, but I presume they can be withdrawn.

  • Java1der

    Any thoughts on the Amazon credit cards? I am toying with the idea of getting one since I shop there pretty frequently.

    • jean

      The Amazon card offers discounts occasionally. One currently running is 20% off kitchen items. Last yr there was a similar discount on garden/yard items, one on music downloads and one on watches. The offer period is short ( 1 week?) so I’ve not taken advantage of many of them. The 3% on Amazon purchases the past few years has been good enough for me.

    • Brains in SC

      I got the amazon card when I purchased a Kindle. I wanted the cheapest one for $79 and got it for $39, plus I thought it would make sense to earn points while buying books for my Kindle and music for my Amazon MP3 account. However, you cannot use Amazon Rewards Points for Kindle downloads OR MP3 purchases. It was great for buying the Kindle, but has done nothing since.

  • Corey Bryant

    NetSpend and PLS are both ripoffs. PLS now has their own brand of pre-paid debit cards and they charge $1.00 per transaction PLUS $9.99. I hate banks, so I’ve been using Netspend for quite a few years. My paycheck is deposited via direct deposit to my Netspend card, but recently they’ve decided to start withholding my pay for up to 2 days. My company REQUIRES direct deposit and everyone else gets paid 2 days before me. I’m currently looking for a bank. =/

  • Corey Bryant

    Oh, and if fees are your worry when it comes to prepaid. Netspend does only charge the $9.99 a month rather than $9.99 plus $1 per transaction.

    Oh, I’ve tried the “Rush” card too. Russel Simmons is getting rich. They charge $9.99 plus $1.00 plus other fees. LOL Anyone using that card is dumber than him.

  • Keith2208

    look to Chase. They are launching a prepaid card this month, you can have your direct deposit set up to it and there is only $4.95 monthly fee, without additional transaction fees or balance inquiry fees

    • Ehh

      I can have my money directed to my bank account and pay $0. Why would I force it on to a fake credit card?

  • JTS

    try H&R Block prepaid card. Had the card for the last five years. No monthly fees but a whopping $20 on every cash back!!!

  • Andre Netz

    This is all a load of hogwash… Well, not all of it. There are stupid fees for calling in. But the monthly “fee” is only $5. My direct deposit ALWAYS comes in on the same day it was sent to them (within hours) rather than the next morning like ANY bank I have ever had.

    Also, there are signs at the gas stations, ON THE PUMPS, that tell you about holds as much as $75 for fuel. If you are only getting $10 in gas, then you need to go inside to avoid the hold. This is true for almost ALL debit AND credit cards. Not just this one.

    Hotels also put holds on the account. The extra 15% is security against damages or extra purchases (mini-fridge, skin-flicks, etc…) You will also discover this with rental companies.

    Do some research and you will soon realize that Netspend is the most popular BECAUSE they ARE the cheapest. Check all the fees and things against Green Dot, or the Walmart cards. If you’re using this for an emergency card, then it’s expensive; but if you’re using it to isolate your real bank account from the online world, It’s the single best service I have found.

  • Worldtraveler777

    An extra feature to notify people about the Chase Freedom would be the Chase Exclusives perk. True, you have to have a Chase checking account, but if you do, you get 10 bonus point on every purchase plus an extra 10% of any bonus point you earn on each purchase (i.e. a fifty dollar purchase will also net you 50 base points + 10 extra for the purchase + 5 pts for the extra 10%). This is a huge perk if you do a lot of small transactions. A 10 dollar purchase essentially earns 2.1%, and a 1 dollar purchase earns 10% cash back. It may not seem like much in small amounts, but it really adds up. Last month, I spent 1888.00, I got 3912 pts = 1888 from purchases + 1325 from quarterly 5% categories + 510 from 10 pts per purchase from my 51 purchases + 189 pts from the extra 10 % of the 1888. So it was an extra 699 pts from the exclusives perk; enough to merit an honorable mention at least.

    • KingRando

      I just closed my chase checking account because I switched to a credit union that gives me 3.5% APR/yr on my money. The teller mentioned I would lose my extra bonus but honestly I don’t notice it – I seriously don’t think it was enabled. 4k points on 2k purchases? I never had a points to spending ratio that good. It was almost always 1:1.

  • Landjenglish

    Choosing the Capital Venture card as #? We fell for what looked like a great deal; two points on every purchase! The problem is that to book your airline, travel, etc you have to go through an travel agency that is outside of Capital One and the points (or air miles) are twice if not more! We dropped that card fairly quickly and now laugh at their ads “whats in your wallet”…’s not the Capital Venture card.

    • NerdWallet

      Hi there,

      You should be able to book your tickets anywhere, so long as you use your Capital One card to do it. You can then use your No Hassle Miles to offset the payment as a statement credit.

    • Aleksandar Jarcev

      Simply not true. I use this card, and I’ve purchased from Kayak, Expedia, etc. You can even use the “miles” for whatever you want, grocery stores, gas, even get it back credited to the card.

    • venkat

      I am not sure why you didn’t like this card. I think if you pay your bill every month and use rewards for travel reimbursement or buy gift cards from the website you will get simply 2% return on every dollar you spend. I think that is very generous along with convinience of VISA that you can use almost every where. Also this is the only card with generous benefits + worl wide acceptance and without any foreign transaction fee which saves lot of money.

    • Jason

      Simply False! I use this card regularly. Best customer service, ALL travel related expenses are reimbursed without any hassle.

  • Momopaige86

    To the author: learn what you’re talking about, they never “allow you to defer payment” as you stated. If you’re a responsible user of credit and you pay ON TIME like you’re supposed to, you won’t have problems with credit cards. Same goes for the high interest rate; pay it off in time and you won’t pay interest EVER. So obnoxious to hear people complaining because THEY are irresponsible/uninformed.

  • J9234

    Venture doesn’t reward points on travel redemption, while Amex Fidelity gives you 2% cash back so you get points on every travel purchase. After 10 years $59 is $590 adding up. There Ventureone is 1.25% cash back and has some appeal in my mind combined with Amex Fidelity. Nevertheless Blue Cash Preferred for those shopping in standard supermarkets typically purchasing $7000 in groceries is 42000 points, WoW! and that doesn’t include the other purchases. Venture is great overseas though so if you go overseas every year, it is probably the best card with the $59 fee, but otherwise I like Fidelity AMEX.

  • J9234

    Good article especially when I saw Citi Forward included, a surprisingly powerful card. AMEX Fidelity should have been included as it is more rewarding than Venture. The Capitalone MC Cash card for 1.5% back is also an overseas card that can supplement the Amex Fidelity. Finally I haven’t done this, but that Blue Cash Preferred seems the kicker. So here are the cards I recommend: Amex Fidelity 2% cash back, Capitalone MC Cash 1.5% overseas free, Citi Forward 5% restaurants, and Blue Cash Preferred 6% groceries ($75 fee). If you can juggle these 4 cards, they should give close to a $1000 back a year for normal spending some international travel overseas.

  • Bdpetroni

    I’ve had the Citi Forward card for years, it’s a card everyone should have in their wallet at all times.

    If there aren’t any special deals being offered (for instance, I’ve got a Citi TY Preferred Card that gives me 5% on everything for 6 months… pretty sweet given that our wedding is coming up), the best overall card these days is Chase Freedom. Discover More is a close second, the only drawback being tiered base rewards.

  • jh

    there’s a signup bonus of 55,000 miles + $50 with the united mileage plus credit card. there’s no spending requirement either. i would say that this bonus trumps the sapphire bonus.

  • G Snyder

    I don’t understand “Its $75 annual fee easily pays for itself with just $25 in grocery
    purchases annually, irrespective of additional spending or the signup
    bonus” for the Amex Blue Cash Preferred. You’d have to spend $1250 on groceries at a 6% rebate rate to earn your $75, no?

    • NerdWallet

      Good catch, Garth! We meant to say $25 in grocery purchases per week, not per year. Thanks for pointing it out!

  • Dunyduke16

    I’m trying to decide between the AE Blue Cash (not Preferred version) and the BankAmericard Cash Rewards. They seem pretty similar with just some minor differences. They offer 1% on all purchases, but AE also offers 3% on groceries and 2% on gas, while BA offers 3% gas and 2% groceries. AE is accepted everywhere and they don’t have a cash back option (just a statement credit), but their rewards aren’t capped. BA’s are capped, but it’s a Visa card, so it’s more widely accepted. BA also offers a 10% rewards bonus if you have rewards transferred to a BA savings/checking account. Any advice?

    • Jinzhao Sheng

      Actually me too! To me it all depends on what I spend on the most. I visit a lot of local markets, and I worry if they will accept AE. I also happen to have a BA checking account. So I guess I will go with BA even though I do wish they have 3% groceries and 2% gas like AE.

      • Dan

        First off if you spend $45 or more a week on groceries, even with the annual fee the AE Blue Cash Preferred is going to be better than the regular Blue Cash card for you. Also, go with the American Express, you can buy gas cards at the grocery store and get the same effective rate of the cash back for gas as you get groceries however you can’t get grocery cards at the gas station.

      • Dan

        Jinzhao Sheng, make sure the local markets show up as grocery stores to be sure to get your cash back, if they don’t show up on the billing statement as grocery store it won’t matter BoA or AE when coming to cashback.

    • WinterTree5

      fyi – My Bank of America card has been my primary since 2001. We’ve enjoyed the rewards (even though they have increased their point values, etc.) The main reason that we are shopping around for a card to replace my BoA is that they seem to have trouble with their security. And even though we’ve never had fraudulent charges on our account, we have had replacement cards with new numbers show up in the mail 4 times due to security breaches on their end. In theory, this is a good thing. However, every time new cards come I have to spend the better part of a Saturday changing over the 11+ accounts that automatically charge to my account. Some, like my pest control company, will not take an account change over the phone and I have to request paperwork, fill it out, mail it back. Sometimes we get late fees from accounts that attempt to bill the old number before we put the change through. We’ve been assured that the security breach is not our fault, but that multiple account numbers are somehow being accessed by an outside party.

  • DShapsDMD

    just signed up and DROPPED AMEX blue cash preferred card. They claim a 6% return on groceries with no limit to the number of points you can earn When i received my card, it stated on the agreement that they only give 6% on the first $6000 of groceries. That’s only $360 per year. Only 1% after that. Considering i am a family of 6 and spend $24,000 a year on groceries, i am better off with Capital one Venture card. Cost $59 per year but truly 2% back with NO LIMIT FOR REAL!!!!!!

    • :)


    • Mike

      Not to burst your excitement but at this rate, you’re still better off with the AMEX. Think of a simple percent analysis:

      Capital One (2 percent) 24,000*.02= $480 cash back
      AMEX (6% up to 6,000, then 1%) (6,000*.06) + (18,000*.01)= $540 cash back

  • Dr_Gibberish

    Just talked to customer service at Amex and they explained that the Blue Cash Preferred card will change its terms in November 2012. Apparently too many people were taking advantage of the 6% cash back on groceries and charging tens of thousands of dollars in groceries on the card. Under the new terms you will get 6% up to $6000 annually and then 1% cash back on groceries. Not sure if the other categories will have limits as well…

  • Tabrez Alam

    it is really a good hand pick for me:)

  • Shawn Clark

    @nerdwallet:disqus , I have a Citi Thank You AMEX, What cards are better for rewards? The Captial One Venture? Southwest RR card? Any others? Thanks

  • RamDC88

    About the mileage value rewards of the Venture Card, is it of the same value mileage for mileage like let’s say compared to American Express Delta Skymiles rewards?

  • legolas666

    The Costco American Express Card seems to be the best Cash Back Card I’ve found! No annual fee, 3% back gas, 2% restaurants, 1% everything else…I easily get back at least $350 each year (you can choose to use it at Costco, or go to Costco and they will give you cash directly if you don’t want to use your earned credit there). I would hope anyone these days using Credit Cards pays them off monthly and carries little to no balance, if possible!)

  • Chad Molenda

    Unless you spend a lot of time overseas making many foreign transactions, the “Nerd’s Choice” credit card, The Capital One Venture Card, is probably the worst choice.

    Ignoring the fee, you get 2 points per 1 dollar spent. After that, it’s 100 points for each 1 dollar you want to spend on travel. This means you effectively get 2% cash back on everything and it’s intended to be spent on travel.

    Math: For every 1 dollar spent, 0.02 dollars are rewarded (2% cash back)
    1 dollar spent * (2 points earned / dollar spent) * (1 dollar rewarded / 100 points earned)
    = 2 points earned * (1 dollar rewarded / 100 points earned)
    = .02 dollar rewarded

    This is only applicable for the first year, where the fee is waived. You get even less, by a variable percentage depending on how much you spend per month, once you add the -59 dollars to the equation.

    The Blue Cash Preferred one may not be too bad, as you’ll have recouped the annual fee after spending $1250.00 in groceries, but I’ve already got an AMX.

    Given that I charge almost everything, I think I’d be best off with the Chase Freedom, should I have to pick from these cards.

  • RT

    this whole article is false. im a cardholder. get my paycheck 2 business days before my co workers. 10.00 monthly fee is 5.95 with direct deposit on your account…customer service is a bunch of non english speakers.but thats about my only complaint

  • Cutter Blaine

    USE CODE 7624176635 .THIS ONE REALLY WORKS. IVE USED IT SEVERAL TIMES. EXPIRES ON JULY 2014 SO HURRY . YOUR WELCOME 😉 Free $20 when you use this refferal code and add $40 to your acct. THIS IS FOR NETSPEND

  • CrapCards


    If you apply for a card that states on the advertisement “12 billing cycles interest free”, you may not qualify for that 12 month term. Instead, the company will unknowingly to you stick you with 6, and you are none the wiser unless you scour over your card member agreement.

    In my case, there was an application for USBank credit card, and on that ad it stated “12 billing cycles interest free” and nothing concerning the fact that you may not get that entire 12 months. They do state however that your APR will vary, depending on credit worthiness. Now wouldn’t you assume, if there was some grey area on the duration of such introductory rate based on creditworthiness, they would fill you in, as they do with the variable APR. This is not the case.

    So my point is this, you may think you’re getting that full year of interest free charges on purchases, and you actually get six.


    How much is Capital One actually paying you???

  • Jane Imperial

    Bank America has changed the rewards on their card. It’s not 1%, 2% for groceries and 3% for gas. Now its 1% across rthe board.