Reader Sean asks the following question on the “Ask Lucky” page of the blog:
Hey Lucky, do you know how available are travel reward cards for people with little or no credit history? I’m a college freshman and aspiring FFer, but I’m not sure if I’d be able to get any of the lucrative credit cards you reconmend. Any advice? Thanks
Let me start by saying I’m no credit expert. I can only share my experiences, given that I was in Sean’s situation a few years ago, and I remember how frustrated I was. Everyone talks about how important it is to build your credit, but how can you build it when no credit card company will give you a chance due to lack of a credit history? It’s kind of like trying to find your first job when all the companies you apply to want to know about your job experience.
The thing I was most excited for when turning 18 was being able to apply for a mileage credit card (and the thing I was most excited for when turning 21 was… being able to rent a car), and on my 18th birthday I applied for a Citi AAdvantage Mastercard and got denied. Oops.
I quickly realized I’d need to start slow, so I then got a student credit card. It was a Discover student credit card (the exact card has been discontinued in the meantime), and my credit limit was $1,000. You shouldn’t have any issue picking up a student credit card, no matter how boring the rewards are (if there are any at all). One card several college aged readers have had no issue getting approved for is the Citi Forward Card for College Students.
Keep the card for about six months, and make sure you charge on it every month and pay your bills on time. Just be sure to keep your credit utilization low, so don’t spend more than 20-30% of your credit line, so you look like a responsible spender.
That’s exactly what I did, and then six months later I went to town applying for “big boy” credit cards. That first day I applied for the Starwood American Express and got instantly approved. I was shocked, so I did what any rational person would do — apply for more cards as if there’s no tomorrow. 😉
That same day I applied for the Citi AAdvantage Visa, Citi AAdvantage Mastercard, and United Visa, all of which I got instantly approved for.
So while that might be somewhat of an oversimplification, the key is to first apply for a student credit card. Then to actually get approved for cards after that, there are a few things to keep in mind:
Apply for a charge card if you can. While it’s only anecdotal, I’ve found that charge cards (as opposed to credit cards) are easier to get approved for. What’s the difference? You technically have to pay off a charge card every month, while you can finance a credit card. The logic is that you’re less of a credit risk to the bank, since you can’t finance something long term. The most common charge card I recommend is the American Express Premier Rewards Gold card, which plenty of young readers have gotten approved for with little or no credit history.
Become an additional/authorized user on a credit card if you can. If your parents have been long-time users of a certain credit card, ask them to add you to the card as an additional user, even if you won’t actually spend any money on it. It doesn’t always work, but sometimes the credit history will actually be applied to your credit score, which can drastically increase it. Even if you don’t spend a dime on the card, it can do wonders for your score (sometimes).
Personal income vs. household income. If you’re a college student you may very well “technically” live with your parents. Once you apply for the “big boy” cards, answer the questions on the application honestly, but keep in mind what they’re asking. Many credit card applications ask for household income as opposed to individual income, so take full advantage of that.
Hope that helps and let me know if you have any questions!
For more information on many of the cards mentioned above, see the “Best Credit Card Offers” page of the blog.