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Dr. Rui Yao, CFP® Quoted in WalletHub

Rui YaoDr. Rui Yao, CFP® Personal Financial Planning Professor, was featured in WalletHub’s piece about credit cards for people with no credit.

Is it important for people with no credit to get a credit card?

It depends on if they need one for the right reasons. For instance, if they would like to take advantage of the convenience of using a credit card instead of cash or check or a debit card and, at the same time, they are conversant of how credit cards work and they are responsible with their finances, then the answer is yes. Also, people who would like to establish a credit profile may benefit from starting with a credit card. However, for those who lack financial literacy and discipline, it would be a good idea to avoid having a credit card.

Why are some people with no credit hesitant to apply for a credit card?

These reasons could vary by individuals. For example, some may have heard other people have used credit cards irresponsibly and the problems that they went through, and they want to avoid having these problems. Some may know their own limitations (lack of financial literacy and/or self-control) and actively choose to avoid having opportunities to make overspending or other financial mistakes and the consequences that come with it.

If you have no credit, is it better to be an authorized user before getting your own credit card?

Since authorized users do build credit depending on the primary user’s card managing behavior, being an authorized user can be a very good way to establish some credit. However, the same reason may hurt them if the primary user doesn’t manage the card prudently.

What tips do you have for someone filling out a credit card application for the first time?

Be honest on the application. Apply for one to begin with and use it responsibly.

Is it better to work with a bank or a credit union when you have no credit?

Credit unions tend to be more user-friendly for beginning financial consumers. But, shop around to get the best deal you can.

Why do credit card companies check your credit if you have none?

They will not know you have no credit history until they check. It is a standard procedure in their process to check the credit on every applicant.

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