Getting your first credit card
How do you get your first credit card, when you have no prior credit history in the US?
This is a simple question that's irritated many immigrants and migrants to America. If everything is about credit scores, and everyone gives you a loan based on your previous credit habits, how do establish those in the first place!
If you think about it, the question has parallels in life. How did you get your first job with no previous experience? How did you drive a car the first time when you had never driven one before? For that matter, how does a US teenager get his first credit card - he too would have no credit history, right?!
The answer to all these questions is similar - you start small and build your way up.
Here are some invaluable tips shared by our readers on how to get your first credit card:
- Open a checking account in a bank. Better to also open a savings account. This may seem a trivial and obvious thing to do, but many people in the US do not have checking accounts. Having a checking and savings account in a bank makes it more likely for that bank to consider your credit card application favorably.
- If you are a salaried employee, have your company electronically deposit salary to your checking account every month ('direct deposit'). This further strengthens your case with the bank for a credit card.
- Become a member of a credit union. Credit unions are financial institutions that operate like banks but are owned cooperatively by their members. They pass on profits to their members in the form of dividends and through lower interest rates and fees. Credit unions are a lot more liberal in considering member applications for credit cards.
For more details on how to become a member of a credit union,
(By the way, this is how I got my first credit card)
- Do not confuse your credit history with the credit history of your spouse (even if you file taxes jointly). Every individual with a separate social security number has a separate credit history. Therefore, do not assume you will be granted a credit card just because your spouse has one.
- However, if your spouse (or relative) does have a credit card and you don't, get an add-on card. This sometimes (though not always) allows their credit history to rub off on you. It starts your credit file and gives you an aged credit line immediately.
- If all else fails, and no one is willing to give you a credit card at all, get a secured credit card. This is your ultimate weapon. Most of the large banks and any credit unions offer this product.
A secured credit card allows you to deposit some money as security or collateral. The bank then gives you a credit card upto the limit of collateral you deposited (or a percentage of that). You use the credit card as you normally would, and make the minimum payments on time, thus building your credit history, Should you default, your collateral may be forfeited.
- If you have a corporate credit card, do not assume you are necessarily building your credit history. Many such cards have company liability and do not contribute to personal histories. My friend had a corporate card and didn't bother getting a personal one. That mistaken impression resulted in setting him back several months.
- When you visit a grocery or department store, apply for a retail credit card co-branded by the store. These cards are usually easier to get.
- If you are getting your first credit card on poor terms (e.g. a very high interest rate or prohibitive fees or very low credit limits), don't worry - just take it! Use the card sparingly if you have to, but don't let up on the chance to build your credit history. The first credit card is always the toughest. Once you get it, you'll have all the opportunity in the world to get better credit cards subsequently.
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