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I see a question Looking to get my first credit card but that seem to focus on students. I have a friend, who just came on H1B with zero credit history. The bank that has the regular account for him/her, has denied giving the credit card despite they can see pay getting deposited. Without credit history one can not get credit card and without credit card, one cannot have credit history, a catch 22. How should one approach to break this catch22.

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    I'd have him try getting a secured card.
    – RonJohn
    Jun 7, 2019 at 15:37

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Have your friend shop with other institutions, perhaps their employer's credit union, if they have one. Many financial institutions will allow a customer with no credit history to open a secured credit card. Some FIs will also offer guidance or counseling on how to get started with credit.

A secured credit card is basically an account where you deposit the limit of the card as a security deposit. So, if you have a $500 limit, you need to put $500 in a savings account (which you cannot actually use) at that bank. Then you use the card as if it was any other credit card, and you'll be reported to the credit agencies as the owner of that account, allowing you to build credit history.

Secured cards typically have much more lenient underwriting, allowing the institution to approve them for people who could not otherwise open a credit card account. This is because the institution has your deposit on-hand in case you default on the loan. Thus, the risk to them is much lower than on a typical unsecured credit card. It's a product that's essentially purposefully designed for your friend's situation.

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  • To add to this, once you've got secured credit card, talk to the bank regularly to see when they can convert it into a normal (un-secured) one. They may allow this surprisingly quickly, after only very few payment cycles. At that point, you'll get your deposit back, and they may increase credit limit, too.
    – void_ptr
    Jun 7, 2019 at 16:24
  • That is good advice - getting a limit increase can give you headroom to make sure your utilization is good (and isn't impacting your credit score). And, of course, make sure you're using the card responsibly regardless!
    – dwizum
    Jun 7, 2019 at 17:26

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