I am a student with a small income and no FICO score because I have never had a credit card before. I was denied for all Capital One cards, including secured cards, on their pre-eligibility tool solely because I have no FICO score. Is this typical, and what are my options to get a starter credit card to build credit for after graduation?
It is completely normal to be denied for a traditional credit card when you first arrive. Lenders usually look for a FICO score, which is a number credit bureaus generate based on your borrowing history, and you do not have one yet. However, federal rules do not require banks to use FICO scores. You can get a starter card from companies that look at your bank account instead.
You can cross this worry off your list. You do not need a FICO score to get your first card, because federal regulators explicitly allow lenders to approve you based on the income in your bank account.
It is very typical to face rejections when you first apply for credit in the US. When you move here, your credit history from your home country does not transfer over. Because you have never had a credit account in the US, you are starting from zero.
Traditional credit card companies rely heavily on your credit history to see how you managed debt in the past. They use this history to generate a FICO score. If you have a thin credit file or no FICO score, these lenders will usually deny your application.
However, a FICO score is not a strict legal requirement. Five federal financial regulatory agencies issued a joint statement confirming that lenders can use alternative data to approve applicants. This means a lender can legally look at your cash flow, which includes the income and expenses in your bank account, to decide if you can repay a loan.
Because of this rule, several startup companies now offer alternative credit cards. Instead of pulling a traditional credit report, they use their own models to evaluate your school, your employer, your income, and your bank account information. You can also look into a debit-credit hybrid card. You use it to make purchases and pay them off over time like a credit card, but the company sets your spending limit based on the money in your linked checking account.
