When you have poor credit, you need a credit card to improve your credit score. However, it can be surprisingly difficult to get a credit card with poor credit. Many issuers have very high requirements for their credit card applicants, and you’ll normally have a hard time getting approved if your score is under 650.
If you do get approved, you’ll be hit with high fees, abnormal interest rates, and your card can do you more harm than good.
This doesn’t have to be so if you choose the right Bad/ Limited Credit credit card. Let’s take a look.
Do Bad Credit Credit Cards Exist?
If you have a poor credit score, it’s difficult but not impossible to get a typical credit card. Your credit score is in most cases the determining factor in being approved for a credit card, but card issuers also look into your income, place of employment, and take into account whether you own your home or rent it.
Regardless, if you aren’t eligible for a typical credit card, you can opt for bad/ limited credit offers. They’re designed to help people improve their credit scores.
You do want to be careful in your choice, as many bad credit cards are far from ideal, so make sure you do your research to find the best option for yourself.
If your credit card application’s been rejected, it might not be because of your credit score. The issuer will inform you about why you’ve been rejected, so you can use this information to improve your chances of being accepted next time.
What Can You Expect from a Bad Credit Credit Card?
Bad/ Limited Credit credit cards differ from the typical ones in a few ways.
Primarily, the issuers will have fewer requirements, and there are even a few cards that don’t require you to go through a credit check at all.
Secondly, you can expect to receive less favorable rates and fees. Of course, just because the rates and fees for these cards tend to be higher, they shouldn’t be abnormal, and you should always compare the rates and fees from a few different issuers. This will let you know the average price you’d have to pay for your credit card, so you’ll be able to make a smarter decision.
Lastly, bad credit credit cards don’t normally have very valuable rewards and benefits, and some don’t even have them at all. Bad credit credit cards are designed to help you improve your credit score, so you shouldn’t expect to get much else from them. Once your credit score has improved, you can upgrade to a more valuable card.
Before you apply for a bad/ limited credit card offer, check with your issuer whether they allow credit card upgrades. It’s in your best interest to go for the issuer who offers card upgrades since you won’t need to close your bad credit credit card account and open a new one (which damages your credit score).
Types of Bad Credit Credit Cards
There are a few different types of credit cards for Bad or Limited Credit, and two of the most popular are guaranteed cards, and secured cards.
Guaranteed Approval Credit Cards
Guaranteed cards will usually have next to no requirements for the applicants, but if you don’t meet those few requirements, your application can still be denied. Since the requirements are so low, you can expect to pay much higher rates and fees and receive much fewer rewards and bonuses, if any.
Secured Credit Cards
Secured cards are possibly your best choice. They offer all of the benefits of regular credit cards, they often come with much more favorable rates and fees, and you’ll often be able to collect reward points, receive a cashback, and more. Their only downside is that you need to make a deposit to get the card, but if you pay all of your credit card debts and bills on time, the deposit will be returned to you when you cancel the card.
RELATED: Secured Cards Explained
Secured credit cards normally have very low limits. Pay very close attention to how you use the money from these cards, as this can damage your credit score. It’s recommended that you use no more than 30% of your credit card limit. Otherwise, your credit utilization ratio will be too high, and the card won’t help you improve your credit score.
Making Multiple Applications
Whether you’re applying for Bad/ Limited Credit offers or some other type of a card, you should always avoid making multiple applications.
When you apply for a new line of credit, such as a credit card, the lender will have to do a full credit check on you. This leaves a trace on your credit report and temporarily damages your credit score.
The effect this has on your score fades over time, and your score will go back to normal within a year, although the credit inquiry will be visible on your report for about 24 months.
Multiple applications within a short period of time will have a much stronger effect on your score and will raise red flags to the lenders, telling them you’re desperate for money. This is why it’s recommended that you wait for at least 3 to 6 months between credit applications.