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Sunday, 11 March 2012

College Student Credit Cards With No Credit

A typical college student who lacks an established credit history may have difficulty obtaining a credit card. A poor credit history in addition to strict underage credit rules in the Credit CARD Act can make credit cards difficult to come by. Despite these obstacles, you may be able to get your first credit card by proving your income, using a cosigner or opening a secured credit line.

Requirements

According to the Federal Reserve Bank, you may have difficulty in qualifying for a credit card if you are under age 21. Credit card rules established in the Credit CARD Act of 2009 attempt to protect young consumers from predatory credit practices by requiring underage credit card applicants to either show proof of income or obtain a cosigner to acquire a line of credit. Additionally, underage cardholders with a cosigner cannot seek an increased credit limit without written consent of the account's cosigner.

Secured Credit Cards

If you have no credit history, you may qualify for a secured credit card. Secured cards work similarly to traditional unsecured cards, in that you may charge debt up to your credit limit and pay the debt in regular monthly payments. However, unlike traditional cards, you must supply your creditor with a deposit to secure your credit line. This protects the credit card company in case you default on your credit card account. However, after several months of responsible credit card usage, you will build your credit score, and you may qualify for an unsecured credit card.

Expert Opinion

According to Leslie McFadden, a financial editor at Bankrate.com, you can establish a good credit score by using only one credit card, though having multiple cards can potentially lower your debt-to-credit ratio, which accounts for 30 percent of your FICO credit score. CollegeBoard.com suggests using your college years to build a responsible credit history in order to simplify your finances after graduation when you may wish to purchase a home, rent an apartment or buy a car. Your credit report may even affect your ability to get a job after college.

Considerations

If you qualify for an unsecured credit card, don't apply for a secured card. Unsecured credit accounts carry lower interest rates and annual fees, whereas secured cards cost much more to maintain. If you must use a secured card, avoid carrying a balance month-to-month, and instead pay off the card with each billing cycle. Also, make sure the credit card lender you choose reports your payments to all three of the major credit reporting bureaus to build your credit as quickly as possible.

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