Are you planning to get a new credit card, but have racked up some pretty poor credit?
Relax. You might think that a bad credit score is going to make your life difficult, but that’s far from the truth. There are many ways in which you can steer your way through this mess comfortably, and ultimately improve your credit. Many companies don’t even check your credit history, which is an excellent option for both beginners and people with a poor credit score.
In this guide, we’ll first explain what exactly bad credit is, and then breakdown all the ways you can improve your credit history and choose the best credit cards for poor credit. We’ll finish up by going over a few frequently asked questions. Ready to earn cashback? Let’s get started.
What is Bad Credit?
Bad credit indicates the inability of an individual or a company to repay its debt. The credit history of the borrower affects the credit score. However, sometimes customers with a poor credit history are at risk of getting approved for more credit, but many lenders understand the circumstance of an individual. As a result, they provide credit at a slightly higher rate.
Potential lenders want to be sure that you will pay back the borrowed money on schedule and in full. They have an option available called a secured loan, but we’ll get into detail about this later. Unfortunately, or fortunately, for your sake, banks are less likely to loan you vast amounts of credit when you have weak credit.
Here’s the good news: many credit cards give you the chance to increase your credit limit if you are successful in making timely payments.
If you find yourself with a bad credit score then consider implementing a solid debt management strategy.
What is a Credit Score?
After a credit card is issued to you, every transaction you make involving credit will define your credit history. Therefore, small purchases and on-time bill payments help you build a good credit record. Your credit history includes past credit records you’ve held, including the type of credit, a measure of the loan, the current balance, minimum installment, timeliness in paying dues and the present record status. If you can identify the credit card that can help you improve your credit score, you’re in the clear.
Your accumulated credit history is used to calculate your credit score. That is, the three-digit number that further indicates the eligibility of an individual to get approved for credit and that sets your interest rate. Thus, if you have a bad credit score, take a look at your credit history.
Your credit score is a significant number in your life. Factors that have a direct effect on this score include:
- Credit history age
- Types of credit on the report
- Billing history
- Level of debt
- Number of credit inquiries
Working to earn cash and build credit is very important, so the ways in which you handle components can have a significant effect on authorities who assess you. In the United States, the Fair Isaac Corporation (FICO) computes financial assessments with data from three credit departments: Experian, TransUnion, and Equifax. Therefore, they ultimately assign you a FICO score or rating, which gives them a preview of your credit reliability.
A Common Misconception About Your Credit Score
When swiping their credit cards, many people don’t bother to check their credit scores due to the common misconception that checking your score will affect your credit. However, this is false. Your credit score should be checked regularly, so you know where you stand financially and can take control of improving your score. Luckily, as your credit score improves, you have a high chance of being approved for rewards cards or credit cards with better interest rates, cash advances, bonus points, and other benefits.
More: Best Auto Loans
All About Bad Credit Scores (and What to Do About Them)
What are the impacts of a bad credit score?
Lenders will decide how much credit to offer you based on your credit score. Your score indicates how reliable you will be to pay back any credit offered to you. For instance, a normal score can fall between 300 to 850, which is calculated based on your credit report.
From time to time, your credit score may fluctuate. Lenders will check your score when you apply for a card; good scores will lead you to cards with your desired credit limits. But bad credit scores aren’t necessarily so bad – there are many options for you to reach higher credit limits, but maybe with a few restrictions.
How to Improve Your Credit Score
If you have a score between 700–800, that’s considered a good credit score. A score of 800 and above is excellent. Although higher credit scores result in better terms and conditions, having a low score gives rise to different rules and terms which can still work for you. Ultimately, taking the necessary steps to improve your credit score is the goal.
Here are a few ways you can tackle a bad credit score.
Get pre-qualified. This will allow you to estimate the approximate loan amount you’ll get approved for. The pre-qualification will enable you to plan and make a budget that would not topple over the loan amount. Note that this is only a soft inquiry and will not harm your credit score, so use this option to stay informed and be one step ahead of your loans. Here’s the downside: this won’t be easy.
Once pre-qualified, it might take a while to get final approval, and your financial situation might change within that time. Thus, the lender might end up reconsidering. The lender also takes into account other factors in addition to your credit score, like your debt-to-income ratio. You’ll need to be cautious about sudden financial decisions that could potentially work against you.
Consider being an authorized user. If you are an authorized user of someone else’s credit card, you are not responsible for the debt payments. However, this might boost your credit score since you can add this account to your credit report. You don’t have much to lose here. If you believe your score will fall because of this main user of this account, you can remove it so you are no longer accountable for payments, even though you might lower your credit score a bit.
Track down a co-signer with an excellent credit score. If someone co-signs on a credit account for you, they are responsible for paying your debts, when you fail to make your own payments. This action will impact the credit scores of both people involved. If your co-signer has a better credit score, the lender will even evaluate their scores and give you a better shot at getting a credit card.
Get a secured credit card account. You can boost the possibility of getting a credit card approved by agreeing to make some security deposits which can later be returned. This way, the lender can be assured that if you fail to make your payments, your security deposits will cover it. You’ll be further incentivized to make your payments on time.
Get an unsecured credit card account. If you do not have enough cash for a security deposit, you might still be able to get an unsecured credit card. Unsecured credit cards have high-interest rates, but they also give you a chance to repair your credit score. You can also switch to other accounts with lower interest rates once your credit score has gone back up.
Credit Card Options for Less-Than-Perfect Credit Holders
Now, let’s get into how you can further build credit by choosing the best credit cards for poor credit. Once you know about your bad credit score, how can you actually get a credit card?
Some credit card issuers don’t even look at your credit score for particular types of credit cards. You’ll get a clean slate, and a chance to further build up your credit score and history. Once you sign up for a primary credit card, you’ll be able to correct and recreate your credit score. If you can balance that score, your access to better cards will expand.
There are two popular types of cards for those who have a poor credit score. Option one is to get a secured card, and option two is an unsecured card. Let’s explore the differences.
Secured Credit Cards
Secured credit cards come into play when a card is offered to you and the credit card company doesn’t want to take on the risk. In other words, they’d lose if you didn’t pay back your debt. So they’d have a reason to doubt your credibility if your credit score is low. Therefore, you’d need to submit a security deposit, which you’d get back when upgrading or closing the card (after paying off your balance).
The secured card deposit offers extra security to the issuer, thus decreasing your risk. Opting for a secured card is a win-win for the cardholder and issuer, and it’s pretty easy to get one. There is, of course, an approval process, but people aren’t often rejected (though it does happen sometimes). That’s why you’ll need to be transparent about your finances before getting a secured card – this will boost your approval chances.
Also read: How to Pick the Best Credit Cards
Unsecured Credit Cards
Unsecured credit cards are options for those who can’t or don’t want to make a security deposit to the issuer. This type of card is best when you are able to make payments on time. In some cases, not making timely payments can cause your interest rates to go up.
Not into secured or unsecured credit cards? If you don’t need a very high credit limit, there’s also the option of getting store credit cards.
9 Top Credit Cards for Poor Credit
Now that you know all about bad credit and what to do about it, let’s explore the best credit cards that can help you with situations explored above.
Remember that not all cards are ideal for every individual. Some cards are more useful in creating a good credit score, while others are meant for maximized credit limits or foreign transaction fees. Our below list will give you an overview with features and benefits explained (but be sure to read all terms and conditions before signing an agreement).
1. Credit One Bank Platinum Visa
This one is attractive because it’s a rewards credit card, even though it is offered to those with a poor credit score. It’s also a cash-back credit card: it gives you a 1% cashback on any purchases that come under eligibility criteria. Other benefits include the fact that it allows you to enjoy a $0 liability against fraudulent activities, and you can determine if you pre-qualify in under a minute.
What’s more, your credit line is reviewed periodically, which means you can build your credit if you’ve made payments on time and avoided going over your credit limit. The card’s payment option is convenient since it allows you to choose any payment date suitable for you. You can also view your credit score online for free and use the Credit One Bank mobile app to access your account at any time.
- Regular Purchase APR: 24% – 26.24%* Variable
- Annual Fee: Fee of $0 – $99
- Best For: cashback and credit development
2. Capital One Secured MasterCard
This card is great for building credit, as long as you use it responsibly. There is no annual fee. This account is a secure account, which means that you need to make a secure payment of $49, $99 or $200. You would first get the card with a $200 credit line, but this limit can be extended after you complete 5 monthly payments. There is also no additional deposit required to extend the limit. This card is accessible in many nations all over the world and your account would available at all times over the mobile app.
- Regular Purchase APR: Fee of $0
- Annual Fee: 99% Variable
- Minimum Deposit: $49, $99 or $200 Refundable
- Best for: cashback and credit development
3. Fingerhut Credit Account issued by WebBank
Do you urgently need a credit card without waiting forever to get approved? This card is the solution for you. It has a quick and straightforward application. You won’t need to wait longer than a minute to get a credit decision. The lender decides your eligibility and qualified perks during the active period of the account. You can also take advantage of payments as low as $7.99 per month.
- Regular Purchase APR: 99%*
- Annual Fee: Fee of $0
- Best for: correcting your credit history
4. Merrick Bank Double Your Line™ Visa® Credit Card
This card gives you the ability to increase your credit limit quickly and without any documentation or hassle. It works pretty simply: all you have to do is make your minimum payment on time for the first 7 payments. If you meet this requirement, your credit limit will be doubled without any intervention – that means no forms or approval needed. Also, you get to see if you are pre-qualified within minutes, which saves a lot of time.
A bonus: this card protects you from fraudulent charges giving you $0 fraud liability. You can access your account online anytime from the mobile app, and there are no penalty rates for late payments or Over Limit Fees.
- Regular Purchase APR: Issuer decided the terms
- Annual Fee: Issuer decided the terms
- Best for: increasing your credit limit
5. First Progress Platinum Select MasterCard® Secured Credit Card
This card is a fantastic option for people with low credit scores. The lender does not check your credit history or credit score before approving your application, so you can get this card more quickly and dodge wait time for approval. This card is accepted everywhere, but note that it’s a secure card, so you are expected to make a refundable deposit of $200-2000 which you earn back once balances are paid off. You can access your account anytime and anywhere.
- Regular Purchase APR: 13.99%* Variable
- Annual Fee: Fee of $39
- Minimum Deposit: $200 Refundable
- Best for: new credit cardholders
6. First Progress Platinum Prestige MasterCard® Secured Credit Card
This card is similar to the above, but it has a lower annual percentage rate (APR). The lender decides your credit limit without requiring a specific credit score or history to approve you.
- Regular Purchase APR: 9.99%* Variable
- Annual Fee: Fee of $49
- Minimum Deposit: $200 Refundable
- Best for: new credit cardholders
7. Green Dot Primor Visa Gold Secured Credit Card
This card is another great option for people with poor credit (but remember, it’s not the answer for everyone). The lender does not require any minimum credit score or credit history, and the APR is super low. There are zero processing and application fees. It provides a credit line from $200 to $5000. Finally, the cherry on top: there is no penalty rate for late payments.
- Regular Purchase APR: 99%* Variable
- Annual Fee: Fee of $49
- Minimum Deposit: $200 Refundable
- Best for: building credit
8. First Progress Platinum Elite MasterCard® Secured Credit Card
This credit card is similar to First Progress Platinum Prestige MasterCard® Secured Credit Card and First Progress Platinum Select MasterCard® Secured Credit Card but with higher APR and lower annual rate.
- Regular Purchase APR: 19.99%* Variable
- Annual Fee: Fee of $29
- Minimum Deposit: $200 Refundable
- Best for: correcting your credit history
Check Out: Refinancing an Auto Loan
9. The Secured Visa® from Merrick Bank
After using this card for one year, your account will be reviewed, and the issuer will then decide if you qualify for a credit increase (but an unsecured one). Your initial credit limit will directly depend on the amount of your security deposit made. You can top off your credit limit with more deposits. As a bonus, the bank even helps you gather funds for your deposits. It’s important to note that the maximum initial credit limit is $3000. This card can also be used anywhere worldwide, and the application is quick and hassle-free. As an added benefit, you will receive your credit score every month for free.
- Regular Purchase APR: 70%* Variable
- Annual Fee: $36 the first year, and billed $3 per month after that
- Best for: building credit
Hard to visualize all these features, benefits and rewards points? Here’s a chart to help you compare all the cards we’ve highlighted above.
|Name of Card||APR||Annual Fee||Minimum Deposit|
|Credit One Bank Platinum Visa||20.24% – 26.24%
|$0 – $99||–|
|Capital One secured MasterCard||26.99%
|$0||$49, $99 or $200 Refundable|
|Fingerhut Credit Account issued by WebBank||See website for Details*||$0||–|
|Merrick Bank Double Your Line™ Visa® Credit Card||Issuer decided the terms||Issuer decided the terms||–|
|First Progress Platinum Select MasterCard® Secured Credit Card||13.99%*
|First Progress Platinum Prestige MasterCard® Secured Credit Card||9.99%
|Green Dot Primor Visa Gold Secured Credit Card||9.99%*
|The Secured Visa® from Merrick Bank||19.70%*
|$36 the first year, and billed $3 per month after that||–|
Now that you’re acquainted with some of the best credit cards for bad credit, make sure you’re aware of the terms. For example, some of these cards do have a foreign transaction fee or other fees. Remember: don’t apply for too many credit cards at once, as keeping payments straight can get overwhelming. Also, too many credit card applications can also lead to hard inquiries, which lower your credit score. Moral of the story: educate yourself about the terms before picking the best credit card for you.
Frequently Asked Questions
Below are some of the most commonly asked questions about having a poor credit score that may haunt people in their sleep. Relax, we’re here to help.
Q: How Do I Increase My Credit Score?
A: Be aware that you’re fully in control of your credit score. To make sure you earn a higher credit score, it is necessary first to find your current score. Keep in mind that this score changes with time, and thus you would need to stay on top of it. Whenever any factor in your credit report changes, your credit score changes.
Factors that affect your credit score:
- Your existing debt in total, including all active accounts.
- Your credit utilization ratio. What percentage of your total available credit are you using?
- Your payment history. This includes any late payment made by you. Overall, it shows if you are capable of paying off bills on time.
- All the types of credit you once had in the past and have right now. Note that a personal loan will look riskier than a car loan.
- The length of time you have been using your credit.
- Hard inquiries, or the number of credit applications you have made. Note that soft inquiries do not impact your credit score.
- The number of times you have declared bankruptcy.
- Serious credit infringements. In other words, if the creditor has made multiple attempts to contact you at your address, but you have not been responding.
- Court judgments, or if you have any court cases concerning your debts.
- Regular change in residence or employment.
Once you have determined which factors result in a bad credit score, you will know how to start working on improving it. But be warned: there are many agencies out there that claim to mend your score for a fee. Do not fall into their trap, as restoring a score takes time and effort on your part, and there is no workaround for the same result.
Q: How Can I Improve My Credit History?
A: There are just a few straightforward steps to make your credit history better, listed below.
- Decrease the total amount of credit debt you have.
- Make sure you pay bills on time every month.
- Keep your accounts open and try keeping a zero balance.
- Apply for credit only when you really need it. Otherwise, it will unnecessarily increase your hard inquiries (and lower your credit score).
- If you apply for balance transfer cards, do not close older accounts or cards.
Q: What is considered a bad credit score?
A: The scoring system varies depending on the credit bureau. In the following table, we compare credit scores from two bureaus, namely Experian and Equifax, and show the score category.
Band of Credit for Major Credit Bureaus
|Band of Credit||Experian||Equifax|
Q: What is considered bankruptcy?
A: Bankruptcy is a legal procedure that relieves you from paying any outstanding debts. When a consumer is unable to repay their credit, bankruptcy proceedings offer a way out of the mess. Declaring bankruptcy also helps financially troubled businesses start over by getting their debts forgiven.
By filing for bankruptcy, a borrower seeks relief from debt obligations and earns access to retail credit again. Many times, the borrower will be required to repay a portion of the debt. But do take note that that filing for bankruptcy can lower your credit score, resulting in other difficulties.
Q: How do you file for bankruptcy and how long does it stay on your credit history?
A: There are two ways to file for bankruptcy: through a voluntary petition filed by the borrower, or a petition filed on behalf of the creditors known as a Sequestration order. The length of the bankruptcy public record depends on your case and situation; usually, this duration lasts from three to eight years.
Q: What are the differences between a secured credit card and a prepaid card?
A: With a prepaid debit card, you can only charge a specific amount of money (the amount you deposited). Secured credit cards are backed by a guaranteed deposit used as collateral.
Prepaid cards also do not use credit scores because you are not using credit from the bank. On the other hand, secured cards let you build credit back. Secured cards can be used almost anywhere to make purchases, while prepaid cards have limited online and overall use. Annual transaction fees and maintenance fees are charged on a secured credit card, while a prepaid card involves an activation, withdrawal and deposit fees.
Secured cards carry rewards and card benefits that differ from a prepaid debit card that only offers a guaranteed approval as a benefit. Secured cards are only available through financial institutions, while prepaid cards don’t require a bank account.
Q: Does a credit card require a bank account?
A: It is necessary to have a bank account for all banking and financial matters. If you’re looking for lower banking fees, joining a credit union can be a good option, too. A credit card application can never be accepted without a functional bank account, but prepaid debit cards can be issued and used without having a proper bank account. Prepaid cards use the deposited money by the consumer for all the purchases. Prepaid cards also do not involve credit history, credit scores or reward programs.
Q: When and why should you consider credit counseling?
A: If you are facing financial issues and struggle to maintain a reasonable budget so you can make your debt payments on time, then a credit counselor is what you need. They give you funds and debt management advice, help in preparing your budget, give free counseling sessions and negotiate your interest rates and late fees with your creditor.
Regardless of your age, income and credit history or score, you can benefit from credit counseling. Credit counselors help you to pay off debt and teach you to manage finances.
Here are some scenarios that may call for a credit counselor’s assistance:
- Medical debt. Medical emergencies can happen to anyone, whether it’s an accident or an illness. This can sometimes make your credit consumption higher than expected, leaving you in a precarious situation. A good credit counselor can help you tackle that medical debt.
- Separation or divorce. Divorce can result in extreme emotional and financial stress. A credit counselor can offer you some relief.
- Unemployment: Many people do not keep solid track of their expenses after losing their job. Debts can rise quickly, leaving you in a lot of stress. Here’s where a credit counselor comes in.
Q: How does a credit counselor impact your credit score?
A: Credit counseling can never affect your credit score directly. Credit counselors help you maintain your budget, teach you ways to avoid debt obligations and educate you on bankruptcy options, all of which will help you create a good credit history and score. Counselors will help also you keep control of your credit. They may suggest that you enroll in a debt management plan if needed, which will help you improve your credit score as well.
Q: What is the difference between credit counseling and debt management programs?
A: Credit counseling helps consumers with their less-than-perfect credit, including money management, debt management, and budgeting. Counselors provide you with ways to avoid bankruptcy. On the other hand, credit counselors specially design debt management programs for unique circumstances of debtors.
Debt management programs are for borrowers who have outstanding debts. While credit counseling involves guidance sessions to go over financial situations, debt management programs are 3-5-year payment schedules suggested by counseling organizations.
Q: How much does credit counseling cost?
A: The cost varies by agency, state, and individual financial situation. There are many nonprofit credit counseling agencies that also offer their services.
Beware that nonprofit credit “repairing” companies may offer you suggestions that you can often do on your own. Some of them charge high hidden fees, while others require clients to make contributions to their organizations. Be sure to choose wisely when considering a credit counselor.
Q: Is it possible to get a business credit card without a personal guarantee?
A: Getting a business credit card without a personal guarantee is not a very easy task — cards without a personal guarantee or collateral can risk debt obligations. Credit card companies for sure want to minimize that risk. Therefore, to get a business credit card without a personal guarantee, you’ll have to build up your company’s creditworthiness.
Creditors issue these business credit cards to large businesses with outstanding business credit. There are three types of business credit cards with no personal guarantee:
- Corporate credit cards with no personal guarantee. Annual revenue of about $4 million is needed for this card.
- Corporate gas station cards with no personal guarantees. Companies with annual revenue of $1 million are permitted for this gas station card.
- Prepaid business credit cards with no personal guarantee. Prepaid cards are purchased and loaded with a certain amount. After the deposited amount is used, that card will no longer work unless another deposit is added. This is why creditors do not ask for personal guarantees for this card.
Q: How many major credit bureaus are there in the USA?
A: Even though financial experts like to say that there are only three major credit bureaus present in America, there are actually four of them. The main three credit bureaus have been monitoring people’s credit history for over a century. Awhile back, these agencies were in charge of different US regions: Equifax looked after southern and eastern states, TransUnion looked after central states and Experian covered the West. Today, they cover all parts of the nation. They collect similar information, and they are all non-profit agencies. Innovis is the fourth agency that monitors people’s accounts. However, this agency does not provide a credit score, and this may be the reason experts don’t typically mention it.
Q: How do you pre-qualify for a credit card?
A: Creditors investigate your annual income, along with your debts and assets when you agree to provide your credit information. This investigation is known as a “soft pull.” Being pre-qualified means that you’re able to find your best-suited credit offer, be it a credit card or loan.
To pre-qualify for a credit card, you must have a good credit history and credit score. Pre-qualification is not a confirmed offer of credit. It can also mean that you may qualify for a certain amount of consumer credit, but not necessarily for a credit card or loan.
Q: What is a credit card utilization rate?
A: A credit utilization rate, or credit utilization ratio, is the outstanding balance of your credit card to your credit card limits. To calculate the credit card utilization rate, divide your credit card balance by your credit card limit, then multiply by 100. A low credit utilization rate indicates that you are using a certain small amount of the consumer credit loaned to you.
This rate makes up 30% of your credit report evaluation. Setting up balance alerts that notify you when your balance exceeds the preset limit is an excellent way to manage your credit utilization percentage.
Q: Do card issuers report to the credit bureaus?
A: Yes. Credit agencies receive a monthly consumer credit report. The information that card issuers provide them includes information such as your name and social security number, the nature of the account, whether you are paying on time, the account balance, your credit limit and the monthly payment amount.
Q: Is the Walmart credit card good for those with bad credit?
A: The Walmart card is available for those who have bad credit. Even if you have no credit or very low credit, you still have a chance to get approved for the card. It does not require any annual fees and has a $0 fraud liability. The Walmart card reports to all three main credit bureaus, so it could be a good way to try to improve your credit. The low credit limit that Walmart cards offer increases with responsible usage.
There are two types of Walmart cards issued:
- Walmart store credit card. This card can be used only in Walmart stores and super centers, as well as on their online shopping website and Sam’s Club.
- Walmart MasterCard. This card can be used wherever MasterCard is accepted. The drawbacks of this particular card, however, is a high APR, low rewards and low credit limits.
Summing It All Up
While having bad credit isn’t fun, on the positive side, it does challenge you to learn and improve. Since there is no way to get rid of it except through research and planning, it’s better that you get started as soon as you can. The longer you wait, the worse your bad credit situation will get. Make sure to research credit cards wisely (consult our chart above), consider finding a credit counselor and don’t open too many accounts at once. And remember: bad credit doesn’t define you.
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