No Credit Credit Cards - A Brief Guide

When it comes to getting a credit card, you can usually understand why people with bad credit often get refused; they've shown in the past that their handling of money isn't exactly perfect, so giving them more credit to spend isn't in a lender's best interests. But what if you're just starting out on the credit ladder - say, you've just had your 18th birthday or you've somehow managed to get through life without having any dealings with credit companies? Believe it or not, that can actually be just as bad as having bad credit!

While that might sound crazy though, it actually makes sense when you consider what card providers look for - namely, security. In giving you a card, they're lending you money and expecting it back with interest, so it's no surprise that credit card companies want some kind of assurance that this is going to happen. That's what credit checks are for, because they check against your credit history and see how responsible you've been with your finances in the past. If you've got a good credit history, they'll see that and happily hand over a card; if your credit rating is bad though, they'll see that too and turn you away.

Unfortunately, if you've not had any kind of credit in the past then all these companies will see is... well, nothing! There'll be no proof of how well you can handle money, no assurance that you won't overspend on any credit they give you and no evidence that you make regular repayments on anything you borrow. And sadly, that means you're likely to be turned down simply for the fact that the card provider won't have any way of telling if you'll use it wisely or pay off enough interest to make it worth their time.

Of course, that doesn't mean you can't get a credit card - it just means you'll need to approach a provider that specialises in cards for high-risk borrowers. Some, like Capital One and Vanquis, have cards for people with bad credit and these can also work for people with no credit, although they have interest rates much higher than most other credit cards (usually between 35 and 40%). However, Capital One also has a 'no credit' card with a slightly lower rate (around 29.9%), as does Barclays. If you're just starting out, these can be ideal for building a credit rating especially since they can even have their rates lowered and credit limits raised if you use them responsibly.

In Summary

No Credit Credit Cards...

    * Can be hard to get approval for from the mainstream credit card providers
    * Are usually lumped in with credit cards for people with bad credit
    * Do exist, although they have higher interest rates than regular credit cards
    * Can be provided by the likes of Capital One, Vanquis and Barclays

Copyright: Individual Finance, 2010

Individual Finance has informative articles on No Credit Credit Cards, Bad Credit Loans and many other aspects of UK finance. It also keeps users up to date with the latest money-saving offers and vouchers through regular e-mail newsletters.

Martin Mathers writes for Individual Finance -- he's a professional journalist and writer with 12 years of experience under his belt, covering everything from finance and business to movies, music and technology