Can you get a credit card without a credit check? | Credit card
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If you have bad credit, you may have noticed that getting a loan or a credit card isn’t easy. Almost every time you apply for credit, the lender performs a thorough credit check on your file. A credit check may reveal bad credit, which may prevent you from being approved.
To avoid the potential embarrassment of a denial, you might be tempted to apply for a credit card that doesn’t require a credit check. Before doing so, consider the costs.
Credit cards that do not require a credit check
When searching for a credit card with no credit check, you may come across different terms: no credit check, no credit needed, and guaranteed approval. While these may all look the same, there are a few differences to understand.
No credit check: If you see this advertised, it means the card issuer won’t perform a rigorous credit check and will base their approval decision on other factors, such as your income or work history. If the issuer detects something else wrong with your request, you may still be denied.
No credit needed: These credit cards are designed for people who have no credit history rather than people who have problems with their credit history. If you apply and the card issuer performs a credit check, you may be denied for a bad credit history.
Guaranteed Approval: If you come across this term in your search, move on. Although some issuers do not perform a credit check or require a credit history, there is no guaranteed approval. This is primarily because credit card issuers are required by federal law to consider your ability to pay any debt you may incur with the card. If you don’t have access to income, you may not even qualify for a credit card without a credit check.
If you’re thinking about getting a credit card that doesn’t require a credit check, beware. In exchange for not undergoing a formal credit check, you could be subject to ultra-high interest rates and fees.
“There are many secured credit cards that don’t check your credit but require a security deposit,” says Scott Henderson, Certified Financial Advisor at Simplifinances.com. Often secured cards have a credit limit that is the same or close to the deposit amount.
For example, the Green Dot primor Mastercard Classic secured credit card requires a security deposit equal to your credit limit and charges an annual fee of $39. It also has a low fixed annual percentage rate of 13.99%.
Alternatives to a credit card without credit check
Depending on your situation, you may have other options for rebuilding your credit. “It’s worth trying to get a credit card approved on the basis of a credit check because the terms are often more affordable,” says Bruce McClary, vice president of communications for the National Foundation for Credit Counseling. and contributor to US News.
Here are three alternatives to consider:
Secure bank cards: While many credit cards without a credit check require a security deposit, there are other secured credit cards that check your credit. Although it may not seem like a better alternative, it often is.
Many secured credit cards that require a credit check don’t charge an annual fee – and if they do, they’re usually low. Some secured credit card issuers offer prequalification, which can give you an idea of your chances of being approved based on a soft credit check, which won’t impact your credit score. Capital One and Discover are two secure card issuers that offer this feature.
Some secured credit cards do more than just help you improve your credit score. The Discover it® secure credit card, for example, offers cash back on every purchase you make. If you use the account responsibly, you will have the option of getting your security deposit back without closing your account.
Authorized user status: If you have a trusted family member or friend with good or good credit, consider asking that person to add you as an authorized user on a credit card. By doing so, you can benefit from the good payment activity of the primary cardholder.
As an authorized user, you can obtain a card linked to the account which you can use to make purchases.
“You’re not responsible for paying off the credit card,” Henderson says, but if the cardholder doesn’t pay, it “will have a negative effect on your credit.” So you’ll want to find ways to pay for your trades.
Before applying to become an Authorized User, make sure the card issuer reports Authorized User activity to the three major credit bureaus – Experian, Equifax and TransUnion. Also make sure you understand how the cardholder is using the card. If that person typically has a high balance, for example, it could do you more harm than good.
Credit builder loan:If you prefer to build credit without a credit card, one solution is to take out a credit loan. These loans are designed specifically to help borrowers improve their credit, so they work more like a scheduled savings account than a typical loan.
Instead of giving you the loan funds up front, the lender will usually set aside your payments in a savings account or certificate of deposit. Once you have repaid the entire loan, the lender will return the full loan amount to you, plus accrued interest during your repayment period.
Alternatively, you can apply for a loan with savings guarantee. Instead of setting aside your loan funds while you make payments, lenders will give you the money when you are approved. But the loan is secured by the cash you have in a savings account with the lender. If you want a loan of $1,000, you will need to deposit this amount in a savings account as collateral and will not have access to your savings until you have repaid the loan.
Tips to get your credit back on track
Once you have been approved for a credit card or credit loan, it may take time before you begin to see an improvement in your credit score.
“Make sure you have a plan to make the most of this opportunity,” says McClary, “and raise your score or build a credit score worthy of a better credit product.”
To achieve this goal as soon as possible, here are three things you need to focus on:
Make your payments on time every time. More than a third of your FICO credit score is determined by your payment history. It is essential that you always pay your monthly bill on the due date. Consider setting up automatic payments from your checking account.
“Never miss a payment because it will put you back to square one,” says McClary.
If you choose to get a credit card, make it a goal to pay off your entire balance each month instead of just the minimum payment. It may not change your credit score, but it can save you from having to pay interest on your credit card.
Keep your credit card balance low. If you get a credit card, keeping your balance low is another important step in improving your credit. The amount you owe represents 30% of your FICO credit score. Your credit usage — how much of your credit limit you use — is a major factor in this calculation.
Most credit experts recommend keeping your balance at or below 30% of your credit limit. While this may not be practical if your credit card has a low credit limit, you’ll have more leeway after getting a card with a higher limit.
Avoid taking too much credit. Every time you apply for a loan or credit card, the thorough investigation by the lender can knock a few points off your credit score. Additionally, opening a new credit account will reduce the average age of your accounts, which affects the length of your credit history. And opening several new accounts in a short period of time can indicate higher credit risk.
These factors contribute to the calculation of your credit score, so it’s important to avoid applying for new credit unless you need it. Be careful about the type of credit you take out. Credit cards and high-interest loans can help you build credit, but they can also hurt your overall financial health.