If you need help building your credit, the right credit card can make all the difference. Unfortunately, it can be challenging to pick through the advertisements to find the right credit card for your situation. So how do you start building your credit without a credit history?
Strategies to Build Credit for Newbies
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Secured Credit Cards: These require a security deposit as collateral against the credit limit. They can be provided to consumers with no credit since the risk to lenders is reduced by holding the deposit.
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Credit-Builder Loans: Opposite of traditional loans. You first make all monthly payments, and once they're done, you get the loan amount. Ideal for those with consistent monthly income.
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Local Credit Unions: They can be more flexible with requirements, especially if you're under 21 with limited income.
Boosting Credit Using Trusted Individuals
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Co-signer or Guarantor: Someone responsible for your debt if you can't pay.
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Joint Account: Open an account with someone with good credit.
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Authorized User: Be added to someone's established credit card account. This provides immediate access to aged credit, which is beneficial.
Here are two top cards for credit invisible consumers looking to establish a credit history.
1. Credit Builder Secured Card (CB Card LLC)
- Issuer: Credit Builder Card
- Annual Fee: $29
- APR: 24.99% (variable)
- Best For: Those wanting to build credit.
Features:
- Requires a security deposit to open, with amounts like $200, $300, $500, etc.
- Reports to all major bureaus within a week.
- Build credit by making timely payments.
- Potential to get the deposit back over time.
Pros:
- Reports to all 3 bureaus.
- No prior credit history needed.
- Various deposit options.
Cons:
- High-interest rate.
- Monthly income must exceed mortgage/rent by $425.
2. Discover It Secured Credit Card
- Issuer: Discover
- Annual Fee: $0
- APR: 22.99% (variable); 10.99% intro APR for the first 6 months (until April 10, 2023)
- Best For: Credit builders wanting rewards.
Features:
- Earn 2% cashback on gas and dining for the first $1,000, then 1% afterward.
- 1% cashback on all other purchases.
- Requires a security deposit (min. $200).
- After 7 months, Discover might refund the deposit if maintained in 'good status'.
Pros:
- Earn rewards while building credit.
- No annual fee.
Cons:
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- Requires a higher initial deposit.
Here is a great card to help building credit.
1. Discover It Student Cash Back
- Issuer: Discover
- Annual Fee: $0
- APR: 12.99% to 21.99% (variable); 0% intro APR on purchases for the first 6 months
- Best For: College students seeking to initiate their credit journey.
Features:
- Specifically tailored for students.
- Earn up to 5% cash back on rotating categories each quarter on up to $1,500 in purchases (like grocery stores, gas stations, restaurants, Amazon).
- Earn 1% cash back on all other purchases.
- No annual fee.
Pros:
- Numerous cash back opportunities.
- Customizable card designs.
- No prior credit history needed.
Cons:
- Exclusive to students.
- Cash back categories change every quarter.
