After graduating from college and entering the “real world,” there are many purchases you might need to make, from furnishing your apartment to building a career-minded wardrobe.
Using a credit card responsibly may help you tackle some of these expenses. But how can you get one if you have no credit history? It’s possible, and there are a couple of options you may want to consider. But first, you’ll want to check your credit.
Review Your Credit Report
When you apply for a credit card, lenders will look at your credit history when reviewing your application. Before applying, pull your credit report to see where you stand. Federal regulations require each of the credit bureaus to offer consumers a free copy of their credit report once each year. Be sure to go to the only site federally authorized for these reports: www.AnnualCreditReport.com.
You’ll want to make sure there are no errors or fraudulent accounts listed on your report that may be impacting you negatively. If you find a discrepancy, contact one of the three credit reporting bureaus immediately.
Set Yourself Up for Approval
Reviewing your credit report will best position you to consider the options below on your path to building credit, and ultimately, credit card approval.
1. Find a Job
What does getting a job have to do with getting a credit card? To be a responsible credit card user, you need a way to pay your debts. Having a job shows lenders that you have an income and a means to pay your bill each month.
When you apply for a credit card, the “annual income” box can be filled in based on your gross pay. If the income box is left blank, your chances of getting approved for a credit card may be lower due to the lender’s concern about your ability to pay your bill. If you do have income, the amount you put in that box may impact the credit limit you’re approved for. The lower your income, the lower your credit limit might be.
2. Become an Authorized User
If you have a family member or significant other with a credit card, you can ask them to make you an authorized user. By becoming an authorized user of their credit card, the card’s payment history will be added to your credit report, so you’ll want to make sure the primary cardholder has a positive credit history.
Before being added as an authorized user, have the primary cardholder confirm with the card issuer that the credit bureau will receive the card’s history, as not all card issuers follow this practice. If you’re added as an authorized user, you’ll want to come to an agreement with the primary cardholder on how you’ll use the card and how you’ll pay your portion of the bill. Keep in mind that if the primary cardholder misses a payment or racks up significant debt on the account, your credit could take a hit, too.
3. Do Your Research
While you may be tempted to apply for several credit cards at once when you have no credit history – hoping to get a bite on one – doing so can hurt your credit. And the more cards you apply for, the worse it looks. Carefully research your options to decide which card would work best for you and apply for only one at a time.
You should also research lenders. Individuals with no credit history or a few negative items impacting their score should research financial institutions that provide the best approval odds. Fortunately, some lenders are willing to work with individuals who are building credit for the first time.
To learn more about the Official Credit Card of the Penn State Alumni Association, visit psecu.com/recent-psu-grad.