You need a card to improve your score when you have bad credit. However, getting a card with poor credit can be surprisingly tricky. Many issuers have very high requirements for their credit card applicants, and you’ll generally have a hard time getting approved if your score is under 650. If you get approved, you’ll be hit with high fees and 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 Limited card. Let’s take a look.
How Cards for Bad Credit Work?
If you have a poor score, getting a typical card is difficult but not impossible. 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 and place of employment and consider whether you own your home or rent it.
Regardless, if you aren’t eligible for a typical card, you can opt for poor/ limited offers. These cards are designed to help people improve their scores. You want to be careful in your choice, as many bad credit (BC) cards are far from ideal, so research to find the best option for yourself.
What Can You Expect from a Bad Credit Credit Card?
Poor/ Limited Credit credit cards differ from the typical ones in a few ways.
- The issuers will have fewer requirements, and even a few cards don’t require you to go through a credit check.
- 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 card so you can make a more intelligent decision.
- Lastly, these cards don’t usually have very valuable rewards and benefits, and some don’t even have them. Bad credit credit cards are designed to help you improve your score, so you shouldn’t expect to get much else from them. Once your score has improved, you can upgrade to a more valuable card.
Types of Bad Credit Credit Cards
There are several different types of cards for Poor or Limited Credit, and two of the most popular are guaranteed cards and secured cards.
Guaranteed Approval Cards
Guaranteed cards will usually have next to no requirements for the applicants, but your application can still be denied if you don’t meet those few requirements. Since the requirements are so low, you can expect to pay much higher rates and fees and receive fewer rewards and bonuses, if any.
Secured Cards
Secured cards are possibly your best choice. They offer all of the benefits of regular cards, they often come with much more favorable rates and fees, and you’ll usually be able to collect reward points, receive cashback, and more. The only downside is that you need to deposit to get the card, but if you pay all of your card debts and bills on time, the deposit will be returned to you when you cancel the card.
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Making Multiple Applications
Whether you’re applying for Poor/ Limited Credit offers or another card type, you should always avoid making multiple applications. When you apply for a new line of credit, such as a credit card, the lender must do a full check. This leaves a trace on your credit report and temporarily damages your score.
The effect this has on your score fades over time, and your score will go back to normal within a year, although the inquiry will be visible on your report for about 24 months. Multiple applications within a short period 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.