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New credit card doesn't require credit score

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Consumers as young as 18 have a new way to establish credit that doesn't require you to put up any upfront money.

Consumers as young as 18 have a new way to establish credit that doesn't require you to put up any upfront money.

Without a credit history, that can be difficult.

It didn't take long for Stanford MBA Student Chaitra Yalagabda to experience that first hand. "None of the major banks offered me a credit card despite me having a good credit history back in India," she said.

Chaitra obtained an American Express card in her native India, but using that card in the U.S. would mean she would have to pay a foreign transaction fee.

That's something she could not afford.

"I'm relying on a student loan. So I live you could say each loan payment to the other," said Yalagabda.

Her experience is very similar to other students who have established very little credit history in the U.S.

"Getting credit is a catch 22 situation," said Kalpesh Kapadia. "If you don't have credit history, you can't get credit. And if you can't get credit, you can't build credit history."

That's why Kalpesh Kapadia co-founded Deserve, a Menlo Park-based company that targets the 18 to 29 year old market, college students and young professionals looking to build their credit scores.

Deserve awards credit not based on your credit history, but your credit potential.

"We are looking for a subscription, you are making regular payments on something like a phone bill or Netflix, or some other subscription you have on your account," he said.

Deserve will also ask applicants to give them read only access to their bank accounts.

Shelly Weber is with the non-profit financial education group, Balance.

"They just want to see that you're not bouncing checks. That you're able to save some money and you got a payroll automatically deposited regularly into your bank account," Weber said.

She says other alternatives for young consumers are secure credit cards and reversible loans. Both require you to deposit a specific amount of money before getting an equal amount of credit.

Chaitra looked at all the options and chose Deserve.

She received a credit limit of $500. Within a few months that credit limit has been doubled.

Whatever option the consumer chooses, Weber warns to use it wisely.

"The credit card is to help establish credit and build a score. It's not free money," she warned.

Deserve has at least one other competitor. The Petal Card is expected to launch soon and will also give you a credit card based on your credit potential.

Written and produced by Randall Yip

Related Topics:
financecredit cardscredit programpersonal financemoneybankbanks7 On Your Sideconsumerconsumer concernsSan Francisco
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