While there are good reasons it’s tough for college students to get cards, there are certain types of cards you’re more likely to get approved for.
Why it’s tough for college students to get cards
Both federal regulations and students’ own inexperience are hurdles to obtaining credit.
Federal regulations (the CARD Act): In response to banks handing out credit cards like candy at student orientations for years, the government cracked down in 2009 with the Credit Card Accountability Responsibility and Disclosure (CARD) Act. Issuers can no longer offer freebies (bottle openers, shirts, etc.) while marketing cards on campus. And they must require applicants under the age of 21 to have a co-signer or show evidence of income.
Banks have interpreted the income requirement in different ways, with some requiring independent income from a job. Some accept an allowance from parents, and others count scholarship money as income. Here are Discover’s student card requirements as an example.
Thin credit history: Even if you’re bringing in income, card issuers may be wary of approving you.
“The biggest barrier students face is their lack of credit history,” says Ashley Dull, finance editor at CardRates.
Because the earliest you can get a card on your own is 18, college students almost certainly have bare credit reports (unless a parent has added them as an authorized user). Applying for a card without credit history is like a applying for a job without experience (another struggle that’s also a bit too real for college students), and an issuer might decide to take a pass until you’ve proven yourself.
Types of cards to apply for
Even though it can be difficult for college students to get approved for credit cards, getting that first card can pay off in the form of credit-building. Just one card can be enough to help you achieve a credit score that can help you land a car loan or apartment down the line.
Luckily, Dull says, some issuers have options designed especially for students.
“Having limited credit history makes it difficult for issuers to gauge someone’s creditworthiness, but there are still a lot of really great offers out there for students,” she says.
Dull suggests starting with a student-specific credit card with no annual fee. Because these products are designed for students, issuers are generally more lenient about a lack of credit history. Some issuers even reward good grades with cash-back bonuses and have other attractive features like late-payment forgiveness, Dull notes.
Credit unions are another option, Dull says, because “they typically have attractive offers for students with lower APRs than some of the big banks.”
Types of cards to avoid
While your credit history is in its infancy, there are two types of cards to avoid:
- Sub-prime cards designed for high-risk applicants: Those who have had their credit damaged by bankruptcy and collection accounts may have to resort to cards with high annual fees, set-up fees and sky-high late-payment fees. While you might be getting offers in the mail for such cards, with your sparse but undamaged credit, you should have other options. Even if you’re rejected for a student card, you have secured cards (which allow you to secure a credit line with a deposit) to consider. Some even have no annual fee. You might also ask a parent to add you as an authorized user to build your credit, instead of resorting to an undesirable credit card.
“There are a lot of predatory, if you will, options out there that students should definitely avoid,” Dull says. “Don’t sign up for a card with an annual fee, and always read the terms and conditions to make sure there aren’t any hidden fees.”
- Premium cards you probably won’t get approved for: Each time you apply for a card, the inquiry dings your credit. So don’t shoot for a card that’s out of your league. Some premium travel rewards cards, for example, aren’t willing to give cardholders low limits (after all, the bank wants you to use these cards to charge pricey plane tickets), so they’ll likely reject your application if you’re not worthy of a $5,000 credit line. So wait until your credit is excellent to go for the fancy card with the aspirational rewards and perks.
Using your card to build credit
Once you have a card, it will almost certainly have a low limit, Dull says. So, to boost your score, make sure you use less than 30 percent of that limit (low credit utilization is rewarded in credit-scoring algorithms such as FICO). That likely means making one modest planned purchase a month (gas, for example) and paying in full.
On-time payments are also a must for building up a credit score that will qualify you for better cards down the line. Paying on time also helps you avoid paying interest on your balances, which is especially important because your first card will likely have a high APR.
“As a first credit card, a high APR may be inevitable,” Dull says. “But a credit card is just a tool — it’s more about how you use it that will determine the effects on your finances and credit rather than the card you choose.”