Best Credit Cards for Bad Credit

The Best Credit Cards for Bad Credit

• Capital One® Secured Mastercard® – Best Credit Card for Bad Credit
• Indigo® Platinum Mastercard® – Best for Past Bankruptcies
• Credit One Bank® Unsecured Visa® with Cash Back Rewards – Best for Earning Rewards
• Milestone® Gold Mastercard® – Best for Getting Pre-qualified Online
• Total Visa® Unsecured Credit Card – Best for Building Credit Slowly
• Discover it® Secured – Best Secured Credit Card for Bad Credit

Do You Need a Credit Card for Poor Credit? Here’s How to Tell

Credit cards for bad credit can help you improve your finances and your credit score when you can’t get approved for a traditional credit card or a loan. However, that doesn’t mean these cards are ideal for everyone. In some cases, it’s possible you could qualify for a credit card for fair credit or a traditional unsecured credit card without even realizing it. Before you apply for a credit card for bad credit, make sure this is your best next move. Here are some signs a credit card for bad credit is the best option for your wallet:

• Your credit score is below 650. While there are many credit scores in use today, the FICO scoring model is the most popular. This scoring method assigns scores between 300 and 850, with the highest scores representing the best credit possible. With that being said, a credit score of 650 is usually considered the dividing line between prime and subprime. If your FICO score falls below that range, it’s likely you’ll only qualify for a credit card made specifically for people with poor credit.
• You don’t have any other way to prove your creditworthiness. When you have poor credit, it can be difficult to find a bank willing to give you a chance to improve your situation. This is ultimately why many people sign up for credit cards for bad credit — even when the terms aren’t ideal. When you really just need to get your foot in the door, there may be no other option.
• You have financial goals to achieve. Are you tired of struggling to qualify for car loans, apartments without a cosigner, and rewards credit cards that let you earn points and airline miles? A credit card for bad credit may not offer a lot of perks on its own, but it can lay the groundwork for better credit that can benefit you later on.

How to Apply for a Credit Card with Bad Credit

When it comes time to apply for a credit card with bad credit, there are some best practices that can help guide you toward the best possible outcome. Before you apply for a credit card with bad credit, here are some things to consider:

• Know your credit score. Knowing your credit score helps you narrow down which cards you’re mostly like to get approved for during the process. Check out our list of the best free credit report sites for 2019.
• Try going unsecured first. Many unsecured credit cards for bad credit offer pre-qualification options that let you check the likelihood of getting approved without hurting your credit. It won’t require a lot of work to see if you can get pre-qualified for a better card, so you may as well give it a try.
• Avoid flashy cards. The best rewards, cash back, and travel credit cards may be tempting, but you’ll want to focus on credit cards for people with bad credit specifically first. If you are able to boost your credit score over time, some of the top credit cards will eventually become available to you.
• Go secured for a limited time. If an unsecured card isn’t an option, consider a secured credit card. You’ll need to put down a security deposit, but you’ll still be able to build credit over time. Eventually, you can upgrade your secured credit card to an unsecured option and get your initial cash deposit back.
• Try a prepaid debit card. You might need a bank account to open a secured credit card. If you don’t have one, use a prepaid debit card until you can open an account. You won’t build credit, but it’s a good short-term solution.

How to Leverage Your New Credit Card to Improve Your Credit Score

In case you haven’t caught on by now, you can definitely use a credit card for people with bad credit to improve your score. However, it’s important to understand all the other steps you can take to help your credit, including understanding your credit history and how credit works in general. These six steps will get you started:

1. Get a copy of your credit report.
2. Dispute any inaccuracies on your report.
3. Pay off any current outstanding debt.
4. Get a credit card for people with bad credit.
5. Set up a payment reminder system.
6. Repeat steps 1 through 5 as needed.

Step 1: Get a copy of your credit report.

Your credit report will give you insight into how you can improve your credit score. Request a copy of your credit report from all three of the bureaus through AnnualCreditReport.com (you can request a copy of one or all three every 12 months for free). Look through everything on the report to find any patterns that may be hampering your efforts (such as making payments late or missing payments).

Step 2: Dispute any inaccuracies.

While you’re looking through your credit report, you’ll also want to make sure everything is accurate and up to date. Having an inaccuracy on your credit report could unnecessarily bring your credit score down. If you find an error, you should dispute it by contacting both the credit reporting agency as well as the company that provided the inaccurate information. You can dispute incorrect information on your credit report online, by mail, or by phone.

Step 3: Pay down debt.

If you currently have any outstanding credit card debt, you’ll want to pay that off before opening a new line of credit. Your credit utilization rate – the amount you have charged in relation to your credit limit – accounts for 30% of your credit score. This means you’ll want to keep balances low or paid off in full each month. After you pay off a card, though, don’t close it out. Having a long credit history is also important to improving your credit score.

Step 4: Get a credit card for people with bad credit.

Now that you have a better understanding of your credit score and credit report history, it’s time to start establishing or rebuilding your credit. Apply for one of the credit cards for bad credit on our list, but be sure to limit the amount of applications you fill out. Too many hard inquiries on your credit report can hurt your score. Not sure if you’ll get approved? Many of the cards on our list will let you know if you pre-qualify without hurting your credit score.

Step 5: Set up a payment reminder system.

Now that you’re rebuilding or establishing credit, it’s time to get on top of things. Making on-time payments accounts for 35% of your credit score, so it’s of vital importance not to miss a payment or pay late. Sign up for reminder alerts, set calendar notifications, use financial tracking software, or download an app that notifies you. You can choose to either make one payment a month or break it up into smaller pieces, such as twice a month or once a week. Just make sure you’re at least the minimum balance (or, ideally, the full balance) on time each payment cycle.

Step 6: Wash, rinse, and repeat.

Once you have the basics down, it’s time to keep repeating them. The only way to build credit is to use credit regularly and responsibly. Charge a small amount each month, pay it off in full, and repeat. Check your credit score every few months to see if it’s increasing. Request a copy of your credit report once a year to review it. Good credit doesn’t just happen, but a credit card for people with bad credit is a good first step. If you’re responsible, persistent, and patient with your credit, you can rebuild or establish good credit in time.

How Long Does It Take to Fix Your Credit?

How long it takes to rebuild credit history will depend on your financial situation. The good news, though, is that you can take steps today that could put you on the path to positive credit in less time than you think. Before you get started, you’ll want to understand what goes into your credit score. FICO® Scores are broken down by:

• 35% payment history
• 30% amounts owed
• 15% length of credit history
• 10% new credit
• 10% credit mix

Based on these percentages, the two most important things you can do to improve your credit are to make payments on time and in full each month. You’ll also want to keep all accounts open, even if they don’t have a balance. If you have an unused card with an annual fee, you can request a “downgrade” to an account with no annual fee. As your score improves, you can apply for one of the best unsecured cards for bad or average credit, or even one of the best rewards credit cards if you make good strides. This will help you establish new credit, as well as add to your credit mix. There are plenty of other steps you can take that can boost your credit score in a short amount of time. Here are some of the most important steps you’ll want to consider and how long it might take for them to create a real impact:

Five Steps to Improve Your Credit Score Quickly

• Dispute inaccuracies on your credit report. According to the Federal Trade Commission (FTC), disputing inaccurate information on your credit report is one of the best ways to repair your credit on your own. Generally speaking, credit reporting agencies are required to investigate disputes within 30 days of receiving them. If you do indeed have incorrect negative information clouding up your credit report, getting it fixed could result in a higher score in a little over a month.
• Pay down debt. Since your credit utilization makes up 30% of your FICO score, paying down debt is a smart solution to consider. Credit reporting agency Experian suggests keeping your credit utilization below 30% for the best score possible. If you had one credit card with a $10,000 limit, this would mean keeping your balance below $3,000 at all times.
• Pay off accounts in collections. If you have any accounts with overdue balances in collections, paying them off is a smart idea. The faster you can close out that accounts, the quicker they will stop damaging your score.
• Start building credit history. Fixing your credit requires you to prove your creditworthiness, which you can only do if you are using credit responsibly. A credit card for bad credit can help you in this respect since all your credit movements will be reported to the three credit reporting agencies — Experian, Equifax, and TransUnion.
• Get added as an authorized user. Another step you can consider is having someone with good credit add you as an authorized user on their account. As an authorized user, you’ll have the benefit of having the primary cardholder’s credit movements reported to your credit report. This may not make a big impact right away, but it can definitely help.

When Should I Pay Off My Credit Card Bill?

Always strive to pay your credit card balance in full by your statement due date. There’s no better way to build a solid credit history and healthy credit score. Credit is a powerful tool when seasoned with self-control, but left unbridled, it can wreak havoc on your financial future. Case in point: The average adult with a credit card owes $5,839 as of late 2018. If your card has an 18% APR and you’re only making the minimum payment (usually around 3% of the total balance) you’ll rack up over $5,000 in interest charges by the time you pay off the debt. Paying your credit card off in full also helps to keep your credit utilization ratio low. Your credit utilization ratio is the percentage of your available credit that you have used. Credit bureaus use this metric to gauge how responsible you are. When it comes to credit utilization ratio, low is best. Credit cards can negatively affect your credit utilization if you continuously run large balances. We recommend keeping your credit utilization for each credit card below 30%. You can track your credit utilization on your credit card with some simple math — (balance ÷ credit limit = ratio).

Pro Tip

Most card issuers report your balance and activity to the credit bureaus once per month. The problem is that the report might be issued before your monthly statement is due. So even if you pay your card in full each month, it will appear to credit bureaus that your utilization ratio is higher than it actually is. If you’re committed to keeping your credit utilization ratio low, call your credit card helpline, ask when your credit activity is reported, and make sure to pay your balance before that date. (Paying off charges immediately isn’t a bad idea either.)

Secured Credit Cards vs. Unsecured Credit Cards

Unlike normal (unsecured) credit cards, secured credit cards require an upfront deposit — most have a $200 minimum and $1,000 max — that also serves as your credit limit. If you miss a payment, the card issuer will settle the account with your deposit and adjust your credit limit accordingly, but you’ll still have to pay interest. If you decide to close a non-delinquent account, your deposit will be refunded. On the flip side, unsecured credit cards don’t require a cash deposit but they are typically more difficult to qualify for. An unsecured credit card gives you a true line of credit you can borrow against without putting up collateral, which can be benficial when you truly need to borrow money.

Both Unsecured and Secured Cards are Great for Building Credit

Secured credit cards are less risky for lenders than regular credit cards because they’re bankrolled by you. Less risk means you don’t have to have a great credit score to qualify. That’s why secured cards are one of the best ways to build and improve credit. And after a few months of disciplined use, you might even be able to upgrade your credit limit — or qualify for an unsecured card with a better rewards program. Of course, unsecured credit cards also help you build credit since, like secured credit cards, they report to the three credit reporting agencies — Experian, Equifax, and TransUnion. The key to using either type of card to build credit is using it for purchases regularly to show credit use then paying your balance off on time or early every month. With enough on-time payments and responsible credit use, your credit score should show improvement over time.

Can I Get Approved for a Secured Credit Card? How About an Unsecured Credit Card?

Generally speaking, you need a “good to excellent” credit score to apply for top rewards cards like the Discover it® Cash Back. Secured cards, on the other hand, will consider scores much lower — some cards don’t even require a credit check to apply. But credit isn’t the only factor to consider. Some secured cards, like the Capital One® Secured Mastercard®, have other criteria, like having a bank account. Always make sure you understand the requirements before you apply. If you are on the fence about applying and worried you won’t get approved for any number of bad credit credit cards, a secured credit card is usually a solid bet. And remember, a secured credit card doesn’t have to be forever. The goal of getting a secured credit card should be using it long enough to improve your credit score so that you can upgrade to an unsecured credit card with better perks.

Secured Cards are Ideal for College Students

College students have two primary options for building credit: secured credit cards and student credit cards. A secured card is ideal if you don’t have any experience managing money Also, certain secured cards don’t charge a penalty APR if you’re late with one or two payments. Student credit cards have the advantage of rewards and higher credit limits but are best for students who have already begun to build a credit history. Also note that most student credit cards are unsecured, meaning they don’t require an initial cash deposit or any kind of collateral. Unless you’re incredibly disciplined, you should start with a secured credit card.

Will I Get Approved for a Credit Card for Bad Credit?

If your credit is bad, you may be concerned about applying for a credit card — What if I don’t get approved? Many credit cards for bad credit offer free pre-qualification checks. A pre-qualification check allows the creditor to do a “soft inquiry” on your credit report to establish whether you may qualify for a particular card. This soft inquiry doesn’t affect your credit score, but it does allow you to get an idea of what cards may be best for you.

Will a New Credit Card Hurt My Credit Score?

Here’s how a pre-qualification check differs from an actual application: Applying for a new credit card (no matter your credit score) may result in your credit score taking a dip — temporarily. When you open a new line of credit, the process involves making a “hard inquiry” on your credit report. This can result in a slight dip in your credit score for a short period of time. In general, though, adding a new line of credit may increase your score over time since new credit accounts for 10% of your FICO score. The biggest part of your credit score you want to be aware of is payment history and amounts owed. By using your card responsibly, such as making payments on time and in full each month, you will be establishing good credit habits that may increase your credit score over time. If you rack up too many hard inquiries in a short amount of time, your credit score might be at risk. Here’s a list of the best unsecured credit cards that allow you to pre-qualify for approval. That way, you’ll have an idea of which cards you’re likely to be approved for prior to submitting an official application.

Types of Cards to Avoid with Bad Credit

Not all cards touted for those with bad credit will help you improve your credit score. Here are two types of cards that you should avoid:

• Cards with no grace period: If the card doesn’t have a grace period, don’t sign up. Without a grace period, you’ll begin to accrue interest immediately after your monthly statement processes. It’s also worth noting that card offers change pretty frequently. Sometimes cards have multiple versions as well, so make sure you read the fine print of the current offer before you pull the trigger.
• Merchandise cards: Merchandise cards (often called online catalog cards) aren’t credit cards at all. They’re lines of credit that you can only use while shopping at specific online marketplaces. Because you can’t use them for everyday purchases, they do not help you rebuild credit. (Not to mention they encourage unnecessary spending.)

What to Look for When Comparing Credit Cards for Bad Credit

In our list of cards at the top of this page, we highlighted the best credit cards for poor credit and the features that help them stand out. With that in mind, it’s crucial to make sure you’re looking for bad credit credit cards with the benefits you value the most. Here are the main factors to compare across all cards in this niche:

• Low or no annual fees: Ideally, you’ll look for a credit card for poor credit that doesn’t charge an annual fee. However, paying an annual fee is not the end of the world as long as it’s relatively low. Sometimes you need to pay an annual fee to qualify for a card that will help you build credit, and the fee can be a wise investment in the end.
• Pre-qualification: It’s always a good thing when a credit card allows you to get pre-approved online without a hard inquiry on your credit report. This option allows you to gauge your ability to qualify without taking a hit to your credit score or putting yourself at risk. We suggest looking for cards that offer this option if you’re worried about getting approved and want to know for sure.
• Access to Your Credit Score: The best credit cards for bad credit tend to offer a way to access your credit score for free. Some also offer credit tracking tools that can help you monitor your credit score and its progress over time.
• Rewards: Several of the best credit cards for poor credit make it possible to earn rewards for each dollar you spend. While rewards shouldn’t be the end goal when it comes to credit cards for poor credit, it’s nice to know you’re getting something in return for your spending.

Research More Credit Cards to Rebuild Your Credit

Below 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. Sort, filter, or search for what matters most to find the best credit card for you.