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.
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.
Types of Bad Credit Credit 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.
Top 5 Guaranteed Approval Card Offers
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.
Read: Secured Cards Explained for more information.
Top 5 Secured Card Offers
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.
Bad/ Limited Credit Cards Frequently Asked Questions
Unfortunately, not all credit cards report your activity to all the credit bureaus. For example, if you have a prepaid credit card, your credit activity is most likely not reported. Some issuers do report to credit bureaus, but they don’t report to all of them, and you should avoid such issuers.
If you want to truly build up your credit score, you need to check whether an issuer reports to all three of the major credit bureaus, Equifax, Experian, and Transunion. If they report to just one or two of them, your credit history will be limited, and you won’t benefit from your card as much as you could.
You can make multiple applications for a bad credit credit card, but you shouldn’t. If possible, you should always avoid making multiple credit card applications in a short period of time. When you apply for a credit card, the issuer will perform a full credit check which will leave a trace on your credit report and damage your credit score. Too many applications in a short period of time will make it seem like you’re in a bad financial situation and are in a hurry to get some cash. Many issuers won’t like this.
The full credit check will temporarily lower your credit score, but its effect will fade over time. Within a year, your score will return to normal, and the credit check will be visible on your report for about 24 months. You should wait at least 3 to 6 months before applying for new lines of credit.
Bad Credit credit cards normally have higher rates and fees than typical credit cards that are designed for those with a good or excellent credit score.
However, the rates and fees shouldn’t be extremely high, and if you encounter a credit card for bad or limited credit that has an interest rate higher than 30%, for example, you should avoid applying for this card.
Some of the common fees that you can encounter with such cards include annual fees, cash advance fees, up to 30% interest rates, and more. However, even though these credit cards have an abundance of fees, you should avoid those cards that charge processing fees to open the card and those with monthly or sliding annual fees.
You can apply for a bad credit credit card online, it’s simple, fast, and convenient. Online applications are very similar to in-person applications, and you will need to provide the same personal information for both. In most cases, you will need to provide a personal ID, your verifiable address, social security number, employment status, income information, and more.
Online applications are fast and secure but don’t make them while you’re connected to unsecured public networks (such as public Wi-Fi at your favorite coffee shop). To stay on the safe side, you should only make your online applications through your secured home Wi-Fi, and through your own computer.
Credit history is all the information about your financial activities. To make sure you have a good credit history, you will have to demonstrate responsibility for a longer period. At the same time, this kind of behavior will directly lead to an increase in your credit score.
Several things are good for your credit history:
- Steady income
- Using the same mailing address over a longer period
- Making all of your payments regularly
- Using a minimum number of credit accounts
On top of that, make sure to check your credit report regularly. Sometimes the credit bureaus or lenders will make mistakes when reporting information. If you notice mistakes on your credit, you need to contact them and make it right to avoid further dents in your score.
There are a few ways to improve your credit score, and unfortunately, there are no shortcuts. Improving your score takes time and effort. To improve your credit score, you will first need to pay all of your credit card bills on time. Being late with your credit card payments won’t only affect your credit score, but you will also have to cover the hefty late payment fees that can easily add up.
You should also ensure that you have a credit utilization ratio of less than 30% of your credit limit. A low credit utilization ratio shows that you can manage your money well and are a responsible cardholder. If you want to improve your credit score, you should avoid frequently opening and closing your credit accounts. Closing your accounts increases your credit utilization ratio and lowers your account age. Opening many new accounts will create many hard inquiries on your credit report and damage your score temporarily.
The best credit card for bad credit is generally considered to be a secured credit card. Secured credit cards come with more favorable rates and fees, and they often have some nice rewards as well. The only issue with these cards is that you will need to make a cash deposit to activate it. In most situations, the amount that you deposit will be your credit card limit, but there are some exceptions.
Once you’ve improved your score, you can easily get your deposit back, as long as you’ve been paying off all of your credit card debts on time.
Since secured credit cards have lower card limits, it’s important to be careful with your money. The recommended credit utilization ratio is 30% of your limit, and if you use more than that, you could damage your credit score.
There is usually no need to be pre-approved for a credit card, as this is only useful if your pre-approval is denied. In the case that your pre-approval is denied, you can know for sure that you are not eligible for a credit card, and you will not get it if you apply for it. Having your pre-approval denied won’t have an effect on your credit score.
On the other hand, if you are pre-approved for a credit card, this isn’t a guarantee that you will get the card. Issuers pre-approve you based on a soft credit check, and once you actually apply for the card and they do a full credit check, you might still get denied.
Unfortunately, you’ll rarely encounter a bad credit credit card with many valuable rewards and bonuses, especially if you’re applying for a guaranteed approval card offers. Bad credit credit cards are primarily designed to help you improve your credit score, and rewards and bonuses are few and far between.
Secured credit cards do come with nice rewards, and you can easily get cash back credit cards, collect points, and earn shopping rewards.
If you’re looking to save money, you might want to apply for a shopping credit card. These cards are often available to those with poor credit, and they can offer you special deals and discounts, their only drawback being that you can usually only use them in a select few stores.