How to Get Your First Credit Card

Trying to get your first credit card in your hands can seem like a Catch-22: You can’t get approved for a credit card until you have a history of credit, and you can’t have a history of credit without a credit card.

Having that first credit card can be important to your financial future in many ways. If you use it wisely and build up an excellent credit score, it can be the difference between paying high interest on home loans and other debt, or not qualifying for some loans.

Part of what a creditor is looking for is an applicant who has a history of paying their bills on time, such as credit card bills. Being financially responsible is a big plus when applying for a credit card, and there are many ways to show that without having a history of using credit cards.

Here are some steps to take to help improve your chances of being approved for your first credit card, even without a credit history:

Secured credit cards

There are two types of credit cards: “secured” and “unsecured.” Unsecured credit cards are what most people own and are what you want as a first-time credit card owner. But they can be difficult to get without a good credit score or little or no credit history.

Secured cards are just as their name implies — secured by money you put into an account that the lender takes if you don’t pay back the balance on the card. The initial deposit is usually the credit limit of the secured card, so you’re basically loaning money to yourself while building credit with such a card.

A secured card isn’t the same as a prepaid debit card, which has money loaded onto it and you can’t borrow against credit on it.

A secured card can still be use like a credit card, with charges made to it like any other credit card. The main difference is that you’ve deposited money to back up the card in case you make a late payment.

That doesn’t mean you want to miss payments on a secured credit card. The deposit only protects the lender, and any missed payments could hurt your credit score.

A secured credit card is better than no credit card at all for first-timers, and good habits on a secured card can improve your credit score.

Get a cosigner

To get your first credit card without a credit history of your own, you can get someone with good credit to cosign for you. This can be a close friend or family member who agrees to take on the responsibility of your credit card if you don’t pay your credit card bill.

Having a cosigner can make you less of a risk to lenders and could help you get your first credit card.

This option for your first credit card does, however, have risks. The lender can go after you and the cosigner if you miss a payment, which could hurt the credit score of both you and the cosigner.

There’s also the awkward difficulty of explaining to your parents or best friend that you didn’t make a credit card payment on time. That’s a discussion you don’t want to have at the Thanksgiving dinner table.

Retail credit card

We’ve previously written about the downsides of retail credit cards. These include high interest rates and purchases are limited to the issuing retailer only. If you get a retail credit card at Macy’s, for example, you can only use it at Macy’s.

But if you’re looking for a first-time credit card, retail cards are relatively easy to get. Stores are willing to take a risk with young consumers because the cards can only be used at their stores.

If a retail credit card balance is paid on time and in full, it can help establish a positive credit history on your credit report and help you get your first credit card. Opening a few store credit cards can also help establish credit history.

If you get a store credit card, treat it as you would a credit card from a bank and make payments on time. If you don’t, the late payments could stay on your credit report for seven years.

Retail cards also have low spending limits, so be sure not to use the cards too often or use most of the credit limit. A high utilization ratio can look bad on a credit report.

Utility and rent payments

Making payments on time is the most important part of a credit history — 35 percent of a credit score. Some payments, however, don’t make it onto a credit report unless you prod the billing company.

Payments for utility bills — such as for electricity, phone, gas, water, garbage and Internet — aren’t always reported to credit bureaus.

If you’re living with someone and your name isn’t listed on the electricity bill, for example, then adding your name to it and asking the water company if it reports customer payments to credit bureaus can improve your credit score.

You can also ask your landlord to report your on-time rent payments to the credit bureaus. The online service RentTrack lets you make rent payments online, and those payments are reported to the credit bureaus.

Doing some of these steps should help you build credit so that you can get approved for your first credit card — an unsecured one that doesn’t require putting money into an account to cover possible late payments.

Once you get that first credit card in the mail, you can start building better credit and before you know it, credit card companies will start seeking you out to offer their services.