Getting a credit card without a credit history can present many obstacles if you can’t meet the requirements imposed by the traditional FICO scoring model. Secured credit cards are sometimes an option, but they require an upfront deposit and might not work for everyone.
Alternative credit card issuers are trying to bridge this gap by using their own nontraditional underwriting standards to assess creditworthiness based on factors such as income, employment and bank account information.
The upshot: Even if you have limited credit or no credit at all, you have options. Consider these alternative credit cards.
» MORE: What is a FICO score?
For those with no credit
If you have no credit or low credit scores, the Deserve Classic is a top contender. That’s because the issuer, Deserve, uses its own underwriting process and algorithm to evaluate creditworthiness for this card, looking at factors such as employment and bank account balances, to name a few. No security deposit is required, and the Deserve Classic offers a credit line that goes as high as $1,500, depending on eligibility.
The Deserve Classic does have a $39 annual fee, and you won’t earn any rewards. But the card reports to two credit bureaus, TransUnion and Experian, allowing you to build a payment history. Eventually, if you qualify, you can upgrade to a Deserve card that offers rewards with no annual fee, or you can explore your options with another issuer. (If you’re a student, the Deserve® Edu Mastercard for Students offers rewards and a $0 annual fee upon approval.)
For all of its cards, Deserve also conducts monthly reviews and may increase credit limits for eligible accounts in good standing.
The Deserve Classic card is travel-friendly, with no foreign transaction fees and broad international acceptance.
Petal doesn’t rely on credit scores to determine who qualifies for its credit card. It uses a “machine-learning” underwriting model that considers such things as applicants’ income, expenses, savings and debts. The Petal Visa credit card reports your payments to the three major credit bureaus, TransUnion, Equifax and Experian, allowing you to build a credit history.
The card does not earn rewards, but it also does not require a security deposit. And Petal doesn’t charge any fees — no annual fees, late fees, over-limit fees or foreign transaction fees. (The card does not allow cash advances or balance transfers.)
You must be a U.S. resident with a valid Social Security number or an individual taxpayer identification number to qualify.
For those with limited credit
Deserve® Pro MastercardDeserve® Pro Mastercard targets professionals and new immigrants with an L1 visa, H-1B visa or green card who already have some credit. If you lack credit, Deserve’s underwriting process might allow exceptions if you can meet income and employment verification requirements.
Like the Deserve Classic, it doesn’t require a security deposit, but it’s a big step up from that card in several ways. The Deserve® Pro Mastercard offers a credit limit of up to $10,000, depending on eligibility. Its annual fee is $0, and it earns rewards: 3% cash back per dollar spent on travel and entertainment and 2% cash back at restaurants for purchases up to $500 per billing cycle (combined). For all other purchases, it offers 1% back.
As a Mastercard, it makes an ideal travel companion, with broad international acceptance and no foreign transaction fees.
AvantCard Credit CardAvantCard Credit Card requires that you have some credit history established, even if it’s a thin file. It weighs that factor along with your income and debt to determine eligibility. It does not require a security deposit.
For a $29 annual fee, you’ll get a card that reports to all three credit bureaus: TransUnion, Equifax and Experian. The AvantCard doesn’t earn rewards, but it will save you money on foreign transaction fees. And as a Mastercard, it will also be widely accepted by merchants abroad.
The issuer will also review your account periodically to determine your eligibility for a higher credit limit.
More options to come
Alternative credit cards haven’t been around long, and some startup issuers are still in the initial stages. The CreditStacks credit card, for example, has a waiting list.
The CreditStacks credit card targets international workers living in the United States. It doesn’t require a credit score or credit history, or even a Social Security number upfront (although once you receive a Social Security number, you must report it). Applicants without a Social Security number must provide passport and visa information, along with proof of income in the U.S. The issuer evaluates applicants using factors such as debt-to-income ratio. The card doesn’t earn rewards, but no security deposit is required, and the card has a $0 annual fee.
As more credit card issuers join this growing corner of the market, those new to credit can expect more options that facilitate an obstacle-free path to credit.