Unless you’re one of the few, the proud, and the wealthy, credit cards are all but essential for life in America. The great news is that getting a credit card is not at all difficult. You don’t need a job, an address or even an identity to apply for most of them—but if you do want to build credit or establish a credit score, it’s not easy either. Here’s how:
What Is a Credit Score?
A credit score is a number between 300 and 850, which is based on your credit history. Lenders use credit scores to determine if you are a good risk. The higher your score, the less risky you are, and lenders will offer you better terms on loans or credit cards.
People with first-time credit cards with no credit history can also get credit cards. For example, experts like SoFi suggest, “Starter credit cards are a type of credit card designed for consumers who have no credit history or a very limited credit history.”
How Does a Secured Card Work?
A secured credit card is a first-time credit card with no credit history. It is a good place to start if you want to build your credit history. In order to get a secured card, you must make an initial deposit into an account for the bank or lender. This deposit can be anywhere from $300 up to $5,000.
The money deposited into this account is used to secure the loan in case you do not pay off your balance each month. It will not affect your ability to use it as long as there’s money in the account – so don’t worry about making purchases with funds that aren’t available!
What Is the Difference Between a Prepaid Card and a Secured Card?
A prepaid card is not the same as a secured credit card. A prepaid card does not require you to put up collateral or post a deposit in order to be approved for the account. Instead, the money on your prepaid account is paid in advance, so it’s not connected to any kind of line of credit or savings account.
There are many different types of prepaid cards out there, but most have similar characteristics:
- They allow users to spend only what they have loaded onto their accounts.
- Prepaid cards often come with rewards programs, including cashback offers and points toward gift cards or airline miles.
- Some even offer insurance like roadside assistance or lost luggage protection.
How Can You Build Credit?
To build credit, you need to be approved for a credit card. Many banks will require you to have a cosigner if they don’t see any history of responsible use of credit in order to qualify your application. If this is the case, it’s time to start talking with friends and family members willing to act as co-signers and help get your foot in the door with a bank or credit union.
Once you’ve established yourself as an applicant with good character and responsibility, you must ensure that when using your new credit card, you pay off the entire balance each month by its due date. Doing that won’t accumulate interest charges on top of what was already owed on purchases made during that billing period.
You don’t need a credit score to get a credit card, but it can help you qualify for better cards and lower rates. If you want to start building your own credit history, consider getting one of the best-secured cards on the market.