How do you get credit without a credit score? If you're new to credit, you don't have any history for lenders to assess. You're effectively "credit invisible."
You can build credit with a secured credit card that reports activity to the credit reporting agencies, but you'll need to put up a security deposit and are likely to have low credit limits in the $300-$500 range. Your annual percentage rate (APR) is likely to be nearer the 29.99% limit until you build a sufficient credit history to qualify for a card upgrade.
The Petal card is a new alternative that allows you to use your existing financial records to prove creditworthiness. Petal can develop their own credit score for you based on your bank account and payment information – using far more data than what's reported to the credit reporting agencies. You can check your credit score and read your credit report for free within minutes by joining MoneyTips.
By reviewing your overall money management practices and including factors like income compared to spending/saving habits, Petal is able to make a more comprehensive risk assessment. This philosophy allows Petal to offer credit cards to consumers with thin credit files while offering superior terms.
Petal has no annual fee, late fees – or any fees at all. The only charges you'll pay are the interest charges on any balance you carry. Because of their thorough vetting, the Petal card's APR varies from 15.24% to 26.24% based on creditworthiness – well below competing starter cards.
In addition, Petal offers much higher credit limits than typical starter cards. Credit limits start at $500 and may go as high as $10,000 if your financial records show you can handle such a limit.
That's perfect for young professionals who are starting out in their careers and making good initial salaries, since they may need higher limits for their work and lifestyle. The credit limits on traditional starter cards couldn't cover more than two nights at most hotels, much less pay for airline tickets.
As of May 2019, Petal offers 1% cash back rewards to all cardholders. Your continued responsible credit behavior can earn you further rewards – Petal will bump up your cash back rate to 1.25% after you've made six on-time payments and up again to 1.5% after twelve on-time payments.
You can change to another card with a more lucrative rewards program once you build up a traditional credit history – or you can simply add on a second card with targeted rewards programs. Petal's no-fee approach makes it a valuable card to retain beyond your credit-building period.
As with other credit card issuers, more information allows better assessment of risk. The more accounts you allow Petal to access, the better the risk profile – and the better the chances of acceptance with good terms if you are responsible with your money.
Should you be concerned about Petal's level of account access? Petal only prompts you to link your bank account if there is not enough information in your credit report to process your application. Although Petal keeps application records, they don't access your accounts after the application process is complete, nor do they sell or trade your personal information. They only make money off merchant fees and any interest charges on balances – a safe practice when you've vetted your cardholders properly.
As with any credit card company, your data is still stored with Petal. If you have concerns, contact Petal for further details on how your stored information is encrypted and protected from data breaches.
Petal isn't designed to help rebuild credit – the Petal card is meant for first-time borrowers who are financially responsible but don't have the traditional credit history necessary to prove it. Typical Petal card applicants are young (in their twenties) and make annual salaries between $30,000 and $70,000. If this sounds like you, Petal is another credit card option for you to consider – and has significant APR and credit limit benefits if you qualify.