Simple Rules For Applying For A Card With Poor CreditGetting a credit card for bad credit is one of the best ways to begin repairing any credit mistakes you may have made in the past. However, there are a few “rules” that can help guide you towards the best outcome possible. Before you apply, here are some basic tips to consider:
- Know your credit score
- Decide if you want a card or if you really need a short term loan. If its the latter, check out the Best Bad Credit Loan options.
- Sign up for a credit monitoring service
- Don’t apply for the best rewards cards, travel cards, or cash back cards
- Consider using a prepaid debit card if you find yourself falling behind
|Identity Guard||30-day free trial||$14.99/month|
|LifeLock||30 day risk-free* trial||$19.99/month|
|IdentityForce||No free trial||$23.95/month|
|Experian||7-day free trial||$19.95/month|
|TransUnion||7-day free trial||$16.95/month|
Research More Credit Cards to Rebuild Your CreditBelow is a directory with the most popular credit cards for bad credit in the marketplace. These include the best secured credit cards and unsecured credit cards for lower credit. Sometimes, credit card issuers bring new cards to the market and sometimes they choose to discontinue certain cards. All changes are reflected in real-time in this directory.
Directory of Credit Cards for Bad CreditTo develop an overall rating for each credit card shown, I analyzed the features of each card. After that, I considered the importance level of each feature my measuring how much it matters to the average consumer who is researching credit cards for bad credit. The most heavily weighted features of a credit card for bad credit are Deposit Requirement, Ease of Qualification, and Initial Credit Limit. I also considered the Credit Reporting, Annual Fee, and APR associated with each card. The rating I developed for each card provides an objective basis for comparison based on the features we decided are most valuable to the majority of customers with below-average credit. Sort, filter, or search for what matters most to find the best credit card for you.
Rewards Tier Level
Rating MethodologyTo help explain what I looked at when rating these cards, a more detailed outline is included below.
Deposit RequirementDeposit Requirement is the amount of money the cardholder must deposit in order to qualify for a secured credit card. Since credit card companies take a perceived risk by extending credit to someone with a low credit score, many require this deposit. If you should happen to default on your balance, you should expect your card issuer to keep your deposit. In most cases, there are better uses for the money you would need to deposit to qualify for a secured card. If you’re carrying high-interest debt from another card, for example, you may want to consider using that money to pay down your debt and getting a prepaid debit card to use instead.
Ease of QualificationEase of Qualification carries a high importance rating because credit cards for bad credit can’t help you if you can’t qualify in the first place. And while almost anyone can qualify for a secured credit card if their deposit is large enough, not everyone has enough money to put down a deposit. That’s why the ability to qualify easily is so important. To improve your credit in the long run, you need to be able to qualify for the card of your choosing and start using credit responsibly right away. Prequalification makes the process easier by allowing you to answer a few simple questions that will give you a pretty good idea of whether or not you will be accepted. An added advantage of prequalification is that it doesn’t cause a hard inquiry on your credit report. Avoiding a hard inquiry may make it easier for you to sign up for a secured card if you get rejected.
Initial Credit LimitInitial Credit Limit is the amount you can borrow immediately upon opening an account. This amount is usually low. Most often, the limit is below $500. In contrast, initial credit limits for those with excellent credit can be thousands of dollars. Initial Credit Limit is important because the more you can start with the better. For example, if you have to deposit $300 for a $300 Initial Credit Limit, it might not make sense to open that card. The good news is that many of the best credit cards for bad credit provide a clear path to increasing your credit line. If you can manage to pay your bills on time and stay current on your account, you will likely qualify for a credit line increase after your first year.
Credit ReportingCredit Reporting encompasses both the tools available for you to monitor your credit score and the way the card interacts with the credit reporting agencies. Many of the best credit cards for bad credit provide your credit score on your monthly statement. While not a complete rundown of your credit history, it is nice to see the changes in your score from month to month as you build your credit profile back up. Simply put, the best cards not only help you build your credit, but also provide online tools that can help you monitor your credit score. Another important factor to consider is the fact that not all credit cards report your financial history to all three major credit bureaus: Experian, Equifax, and TransUnion. If you have bad credit, look for a card that reports to all three credit reporting agencies. Remember, a new credit card can only help you if your credit activities are actually being reported.
Annual FeeAnnual Fee refers to the fee charged each year by the credit card company to maintain your line of credit. Typically, annual fees are charged on rewards credit cards or cards that offer certain other valuable travel perks. Unfortunately, almost all credit cards for bad credit charge an annual fee. Although paying this fee may not be ideal, you should consider it as the price you pay for the opportunity to rebuild your credit or establish a positive credit history. Once you repair your credit and build your score over time, you can always cancel your current credit card and apply for one that doesn’t charge an annual fee.
APRThe APR refers to the interest rate charged on your balance when you do not fully pay the balance off each month. Unfortunately, most credit cards for bad credit charge higher interest rates than average. To avoid paying these charges, all you need to do is pay your balance in full each month. Doing so will not only help you avoid paying interest, but it will also demonstrate that you have learned to use credit responsibly.
The Best Way To Build Your CreditThere are several steps you can take to rebuild poor credit, but the easiest path involves applying for a credit card for bad credit and slowly proving yourself over time. There are two types of credit cards that can help you achieve this goal:
Keep in mind that your main goal here is to build your credit back up or establish a positive credit history. Choosing a card that helps you accomplish that goal is the number one priority.
Secured Credit CardsMost credit cards for people with bad credit are secured credit cards. These cards require you to deposit a certain amount of money with the credit card company as collateral. Usually, your credit line is commensurate with the amount you deposit. In other words, your credit line will be equal to your deposit. At this point, you’re probably wondering why anyone would put down a $500 deposit in exchange for a $500 credit line. The main reason people take this route is because they cannot qualify for an unsecured card and they desperately want the opportunity to prove themselves. Remember, the end goal with a secured credit card is to make your payments on time and slowly build your credit over time. If you continue to use credit responsibly, you will likely be able to qualify for a credit card with better terms down the line.
Unsecured Credit CardsMost credit cards you’re familiar with are unsecured, meaning the line of credit extended to you is not secured by any deposit or other collateral. The credit card issuer is simply trusting your history of responsible repayment and your means to repay. Because lending money to people with lower credit is perceived as riskier, there are some very big differences between unsecured cards targeted to this group vs. unsecured cards targeted at people with higher credit.
- Fees: Unsecured credit cards for people with bad credit usually come with higher fees.
- Lower credit limit: If approved, your limit will be much lower, usually less than $500, while people with good credit might get approved for several thousands of dollars depending on their income.
- Interest rate: Again, because of perceived risk, interest rates on these cards are substantially higher.
Making The Right ChoiceAlthough you may find conflicting advice on which type of card is best, you should ultimately choose the card that benefits you the most. In most cases, your “ideal card” will come with low fees and the potential for rewards. That is why I recommend the Credit One Bank® Unsecured Platinum Visa®. If you’re still having trouble figuring out which path to take, consider these strategies:
Strategy #1: Try To Get An Unsecured Credit CardBefore you do anything else, you should first determine if you could qualify for an unsecured card. Although they are typically harder to qualify for, they often come with the lowest fees and will save you from having to put down a deposit upfront. If you’re worried about getting rejected and incurring a hard inquiry on your credit report, try prequalification first. As mentioned above, the Credit One Bank® Unsecured Platinum Visa® offers a prequalification option. Just answer a few simple questions that will give you an idea of whether or not you can qualify before the actual application goes in.
Strategy #2: Go Secured For A Limited TimeIf for some reason you can’t qualify for an unsecured credit card, I suggest getting a secured card. Remember, secured credit cards do not require a lifetime commitment. Even though you have to put down a deposit, you will ultimately get your deposit back if you pay your balance in full and on time. Once your credit score starts improving, you can simply cancel your secured card and apply for an unsecured credit card with better terms. If you choose a secured credit card, make sure you get an updated credit score each month with your statement. For example, the One United Bank Unity Visa Secured Card provides your FICO score each month to help you see your progress. This will help you know when you are ready to apply for a better card that doesn’t require a deposit. Also, make sure that you are utilizing your secured credit card as much as you can. If you want to begin building a credit history, you need to use your card frequently and prove that you can pay your balance in full.
Strategy #3: Use A Prepaid Debit Card As A Short-Term SolutionIf you don’t have a bank account, you might have trouble qualifying for a secured credit card. If this is the case, you may want to consider using a prepaid card for a limited time. Unlike secured and unsecured credit cards, prepaid cards are only funded when you make a deposit. Meanwhile, prepaid cards provide the convenience and appearance of credit without many of the risks. Unfortunately, there are downsides that come with using prepaid cards. For example, since they don’t extend credit, they cannot help you rebuild your credit over time. Also, prepaid cards are known to charge various fees for use. Those fees can include balance inquiry fees, transaction fees, application fees, and monthly maintenance fees.
Research RecapRebuilding your credit is a slow process that won’t happen overnight. To get started, you simply need to figure out why your score is low in the first place and take actionable steps to repair any lingering issues. The best credit cards for bad credit can also help you prove your creditworthiness over time. All of these steps will take some initiative on your part, but the end result will definitely be worth it. The keys to getting the best credit card when you have bad credit are:
- Always make sure you know your credit score.
- Get a bank account. Use a prepaid debit card until you can open one.
- See if you can qualify for an unsecured card on your own.
- If you can’t, then plop down the deposit needed for a secured card.
- Keep making your payments on time!