If you’ve decided to get your first credit card, congratulations. A positive credit history is an asset that will help you save when you buy a home, a car and insurance — and it may even help you get a job. But keep in mind, the keyword is “positive.” There are many ways to misuse your first card, and finding credit cards for people with no credit can be tricky.
Want to get off to a good start? Here are some tips:
1. Become an authorized user
If you’ve never been extended credit, it may be difficult to convince a lender that you’re a good risk. Instead of looking for no credit credit cards, ask a friend or family member to make you an authorized user on one of their accounts. If they agree, you can use the card and the balance and payment information will appear on your credit report. But pick this person carefully, since their behavior will reflect on your credit and vice versa.
2. Consider a secured card
No luck becoming an authorized user? Apply for a secured credit card instead. You’ll borrow against a cash deposit you make with the lender. Your credit limit will be low, but you’ll have a much easier time getting approved without a long credit history, and if you handle it responsibly, you could get bumped up to an unsecured card.
3. Keep an eye on your credit utilization ratio
Once you’re approved for a card, use it wisely. One way to do this is to keep your credit utilization ratio — your total unpaid balances divided by your total credit limits — low. If you typically use more than 30% of your available credit each month, your credit score will suffer. Try making multiple payments throughout the month if your lender allows it. This will control your utilization even if you have a low credit limit.
4. Don’t get too many cards
Now that you have one card, you might be tempted to apply for more. Be careful. Every time you apply for new credit, the lender makes an inquiry, which has a temporary, negative effect on your credit score. This is even more noticeable if you have a short credit history. It shouldn’t stop you from shopping for a card when you need it, but it does mean that you shouldn’t send out a lot of applications at once.
5. Monitor your credit report
When you have credit, you also have a credit report, a record of your payment history, card applications and other credit-related information. If you have a short credit history, each negative or positive step has an outsize effect on your score, so every on-time payment counts.
Most credit reports are accurate, but they do sometimes contain mistakes, and it’s your job to find them. Each of the three credit bureaus allows you to request one free report a year. Order one at a time throughout the year to best monitor your credit, and follow the Federal Trade Commission’s guidelines for disputing incorrect information.
The bottom line
Now that you know how to get a credit card with no credit, take your new responsibility seriously. Credit cards are nothing to be afraid of, but poor credit decisions can take years to repair, and if they affect an authorized user, they can damage your personal relationships as well. Paying your bills on time and in full every month is the only way to make your new credit card count.
First kiss photo via iStock.