How to apply for a credit card with bad credit
When it comes time to apply for a credit card with bad credit, follow some best practices to 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.
- Try going unsecured first. Many unsecured credit cards for bad credit offer pre-qualification options so you can check the likelihood of getting approved without hurting your credit.
- Avoid flashy cards. The best rewards, cash back, and travel cards may be tempting, but you’ll want to focus on credit cards for people with bad credit specifically first.
- 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 building credit in the process.
- 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 use credit cards for people with bad credit to improve your score
Did you know you can use a credit card for people with bad credit to improve your score? Understanding your credit history and using your credit card for bad credit responsibly can improve your credit score over time. These six steps will get you started:
- Get a copy of your credit report
- Dispute any inaccuracies on your report
- Pay off any current outstanding debt
- Get a credit card for people with bad credit
- Set up a payment reminder system
- Repeat steps 1 through 5 as needed
Step 1: Get a credit reportHow to use credit cards for people with bad credit to improve your score
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 (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 be unnecessarily bringing your credit score down. If you find an error, you should dispute it by ing both the credit reporting agency as well as the company that provided the inaccurate information.
Step 3: Pay off outstanding 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 and/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
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 people with bad credit on our list. Just be sure to limit the amount of applications you fill out. Too many hard inquiries 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 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 a 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, 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 rebuild credit history?
How long it takes to rebuild credit history will depend on your financial situation. The good news is, though, that you can take steps today that put you on the path to positive credit.
First and foremost, if you have a large amount of outstanding debt that you’ve been struggling to pay off, then you should focus on reducing that debt before you incur any more debt. Once your current debts are managed, you can start rebuilding credit with one of the best credit cards for bad credit.
To 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 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.
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 American household has . 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 $2,000 in interest charges every month and continue to lose ground.
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).
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 help line, 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.)
How does a secured credit card work?
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.
Secured cards are great for rebuilding 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.
Can I get approved for a secured credit card?
Generally speaking, you need a “good to excellent” credit score to apply for top rewards cards like the Discover it® Cashback Match™ or Chase Sapphire Preferred® Card. 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.
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.
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 (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.)
Research More 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.
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Rewards Tier Level
No Annual Fee
Credit CardAnnual FeeSecondary Card TypeIssuerRewards Tier LevelApply Online
Credit CardAnnual FeeSecondary Card TypeIssuerRewards Tier LevelApply Online
$0 - $99
Credit One Bank
$36 the first year. Billed $3 dollars per month thereafter.
Money360’s best credit cards for bad credit:
- Capital One® Secured MasterCard®
- Indigo® Platinum Mastercard®
- Credit One Bank® Unsecured Visa® with Cash Back Rewards
- Milestone® Gold Mastercard®
- Total VISA® Unsecured Credit Card
- Discover it® Secured Card – No Annual Fee
- USAA Secured Card® American Express® Card
Cards with no grace periodIf 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 cardsMerchandise 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.)
Rewards Tier Level
No Annual Fee