Credit Cards for Bad Credit

Simply getting a credit card will not help you build your credit history. Making on-time minimum payments with all of your creditors and keeping account balances low relative to the credit limit are key to receiving positive marks on your credit history. Prepaid debit cards, unlike credit cards, do not provide a line of credit and do not influence your credit history. Choose from secured and unsecured credit cards, and prepaid card offers below - some of them are fee-based.

See offers from our partners below.

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 APPLY ONLINE

at USAA's
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Credit Needed
Bad Credit
  • Best for members rebuilding or establishing credit.
  • Determine your own credit limit ($250 to $5,000) with an interest-earning CD.
 APPLY NOW

at USAA's
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Credit Needed
Bad Credit
  • Purchases Intro APR
    N/A
    Balance Transfers Intro APR
    N/A
    Regular APR
    10.90%-20.90% (Variable)
    Annual Fee
    $35
    Credit Needed
    Bad Credit
 APPLY ONLINE

at Discover's
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Credit Needed
Fair/New to Credit
  • No Annual Fee, cash back on every purchase, and helps you build your credit with responsible use.
  • Your Secured Credit Card requires a refundable security deposit up to the amount we can approve of at least $200 which will establish your credit line.
  • You will need to provide your bank information when submitting your security deposit.
  • We will automatically begin reviewing your account starting at 8 months to see if we can transition you to an unsecured line of credit.
  • Earn 2% cash back at restaurants & gas stations on up to $1,000 in combined purchases each quarter. Plus, 1% cash back on all your other purchases.
  • Get a dollar-for-dollar match of all the cash back you've earned at the end of your first year, automatically.
  • New! Receive Free Social Security number alerts-Discover will monitor thousands of risky websites when you sign up.
  • See additional Discover it® Secured Card details
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at Discover's
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Credit Needed
Fair/New to Credit
  • Purchases Intro APR
    N/A
    Balance Transfers Intro APR
    10.99% for 6 months
    Regular APR
    23.99% Variable
    Annual Fee
    $0
    Credit Needed
    Fair/New to Credit
 APPLY ONLINE

at First PREMIER® Bank's
secure site

Credit Needed
Fair/Bad Credit
  • Must have a checking account to qualify
  • A credit card offer for those currently building credit history
  • All credit types welcome to apply!
  • Quarterly FICO score on your monthly billing statement.
  • Chip card technology, so paying for your purchases is more secure at chip-card terminals
  • Make your payments on time each month, and keep your balance low relative to the credit limit, for positive marks on your credit report.
  • The next First PREMIER Bank credit card customer could be you!
  • See additional First PREMIER® Bank MasterCard® Credit Card details
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at First PREMIER® Bank's
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Credit Needed
Fair/Bad Credit
  • Purchases Intro APR
    N/A
    Balance Transfers Intro APR
    N/A
    Regular APR
    See Issuer Website
    Annual Fee
    See Issuer Website
    Credit Needed
    Fair/Bad Credit
 APPLY ONLINE

at Credit One Bank's
secure site

Credit Needed
Bad Credit
  • See if you Pre-Qualify without harming your credit score
  • 1% cash back on eligible purchases, terms apply
  • No deposit requirements and opportunities to build your credit
  • Enjoy the flexibility to choose your payment due date. Terms apply.
  • Receive opportunities for credit line increases, a fee may apply
  • See additional Credit One Bank® Cash Back Credit Card details
 APPLY NOW

at Credit One Bank's
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Credit Needed
Bad Credit
  • Purchases Intro APR
    N/A
    Balance Transfers Intro APR
    N/A
    Regular APR
    16.99% - 24.99% Variable
    Annual Fee
    $0 - $99
    Credit Needed
    Bad Credit
 APPLY ONLINE

at USAA's
secure site

Credit Needed
Bad Credit
  • Best for members rebuilding or establishing credit.
  • Determine your own credit limit ($250 to $5,000) with an interest-earning CD.
 APPLY NOW

at USAA's
secure site

Credit Needed
Bad Credit
  • Purchases Intro APR
    N/A
    Balance Transfers Intro APR
    N/A
    Regular APR
    10.90%-20.90% (Variable)
    Annual Fee
    $35
    Credit Needed
    Bad Credit
 APPLY ONLINE

at Capital Bank's
secure site

Credit Needed
No Credit Check
  • No credit check necessary to apply. OpenSky believes in giving an opportunity to everyone.
  • The refundable* deposit you provide becomes your credit line limit on your Visa card. Choose it yourself, from as low as $200.
  • Build credit quickly. OpenSky reports to all 3 major credit bureaus.
  • 99% of our customers who started without a credit score earned a credit score record with the credit bureaus in as little as 6 months.
  • We have a Facebook community of people just like you; there is a forum for shared experiences, and insights from others on our Facebook Fan page. (Search "OpenSky Card" in Facebook.)
  • OpenSky provides credit tips and a dedicated credit education page on our website to support you along the way.
  • *View our Cardholder Agreement located at the bottom of the application page for details of the card.
  • See additional OpenSky® Secured Visa® Credit Card details
 APPLY NOW

at Capital Bank's
secure site

Credit Needed
No Credit Check
  • Purchases Intro APR
    N/A
    Balance Transfers Intro APR
    N/A
    Regular APR
    18.39% (Variable)
    Annual Fee
    $35
    Credit Needed
    No Credit Check
 APPLY ONLINE

at First PREMIER® Bank's
secure site

Credit Needed
Fair/Bad Credit
  • Must have checking account to qualify.
  • Unlike some other issuers, we may approve those currently building their credit history.
  • Monthly reporting to the major Consumer Reporting Agencies.
  • Issued by FDIC-insured First PREMIER® Bank.
  • Only you can build a good credit history. Make your payments on time each month, and keep your balance low relative to the credit limit, for positive marks on your credit report each month.
  • Top 20 Issuer of MasterCard Credit Cards
  • See additional First PREMIER® Bank Credit Card details
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at First PREMIER® Bank's
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Credit Needed
Fair/Bad Credit
  • Purchases Intro APR
    N/A
    Balance Transfers Intro APR
    N/A
    Regular APR
    See Issuer Website
    Annual Fee
    See Issuer Website
    Credit Needed
    Fair/Bad Credit
 APPLY ONLINE

at Genesis Bankcard Services's
secure site

Credit Needed
Bad/Poor
  • Quick pre-qualification available with no impact to your credit score
  • Easy pre-qualification process with fast response
  • Choose your custom card design - Free
  • Free online account access
  • Protection from fraud, if your card happens to be lost or stolen
  • Accepted at over 35 Million Locations Worldwide!
  • Previous bankruptcy OK
  • See additional Milestone® Gold MasterCard® details
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at Genesis Bankcard Services's
secure site

Credit Needed
Bad/Poor
  • Purchases Intro APR
    N/A
    Balance Transfers Intro APR
    N/A
    Regular APR
    23.90%
    Annual Fee
    $35-$99 (varies by credit level)
    Credit Needed
    Bad/Poor
 APPLY ONLINE

at Mid America Bank & Trust's
secure site

Credit Needed
Bad/Fair
  • Checking Account Required
  • Fast and easy application process; response provided in seconds
  • A genuine VISA card accepted by merchants nationwide across the USA and online
  • Manageable monthly payments
  • If approved, simply pay a Processing Fee to open your account and access your available credit
  • Reports monthly to all three major credit bureaus
  • Select your favorite card design from our gallery, for free!
  • No-Fee credit line increase opportunities!
  • See additional Total VISA® Unsecured Credit Card details
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at Mid America Bank & Trust's
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Credit Needed
Bad/Fair
  • Purchases Intro APR
    N/A
    Balance Transfers Intro APR
    N/A
    Regular APR
    See Terms*
    Annual Fee
    See Terms*
    Credit Needed
    Bad/Fair
 APPLY ONLINE

at Mid America Bank & Trust's
secure site

Credit Needed
Bad/Fair
  • Checking Account Required
  • Fast and easy application process; response provided in seconds
  • A genuine VISA card accepted by merchants nationwide across the USA and online
  • If approved, simply pay a Processing Fee to open your account and access your available credit
  • Select your favorite card design from our gallery, for free!
  • No-Fee credit line increase opportunities!
  • See additional Total Visa Patriotic Card details
 APPLY NOW

at Mid America Bank & Trust's
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Credit Needed
Bad/Fair
  • Purchases Intro APR
    N/A
    Balance Transfers Intro APR
    N/A
    Regular APR
    See Terms*
    Annual Fee
    See Terms*
    Credit Needed
    Bad/Fair
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Taking out a Credit Card and Other Tips for Building Credit

OK, so your credit isn’t its best.

Maybe you don’t have much experience with paying bills, or perhaps you’ve had a couple of late payments. Well, we’ve got your back.

It may seem counterintuitive, but the best and fastest way to firm up that sagging credit is with a credit card. That’s right. Believe it or not, with the right credit card, you can improve your credit in a few short months. The trick is to know how.

We’ll tell you what you need to know and how to do it so there aren’t any surprises along the way. But first…

What is a bad credit score?

The score you’ll need to pay the most attention to is the FICO, the scoring model most used by lenders. A “bad credit” score is typically under 580 out of a range of 300-850, with 850 as the best.

To get a good or excellent rating, you’ll want to shoot for at least 700. Below that and you’ll be offered higher interest rates and other not-amazing financial products. (More on that later.)

That’s the bad news. The good news is that it takes a few short months of good consumer behavior to improve your score. But beware: Once you’re on the path to good financial habits, you’ll want to keep it up, because one misstep can drop your score quickly, in fact, considerably more quickly than when you were improving your credit.

Why should I care about my credit score?

If you are a recent graduate or you are accustomed to paying bills with cash or checks, it’s easy to ask why you should care about your credit score. There are a number of reasons why you should care, though, primarily because it can save you money with lower interest rates and even better insurance premiums.

The truth is even if you plan to live off the grid the rest of your life on Montana farmland you inherited from your great-aunt, credit matters. That’s because it isn’t only lenders who keep an eye on your credit. Landlords, utility companies, even employers, check your credit. They want to make sure you’ll pay on time and that you are reliable.

And remember that Montana farmland? You need auto insurance to drive to town for propane and supplies, right? Well, insurance companies look at a specific scoring model to decide what rate to charge you.

The higher the score, the nicer your apartment, the better your job, the lower your insurance payment, the better your auto loan’s interest rate – you get the picture. And you can save hundreds a year because of that great credit score.

What determines bad credit?

Bad credit is determined by how you have handled your credit over the years. If you have missed payments or even just don’t have a lot of information in your file, your credit may not be great. The 2 most important components of your FICO score are on-time payments (35% of your score) and how much you owe compared to how much credit you have available (30% of your score). That means if you have had late payments, that is likely the primary cause of your poor credit, but if you have a high balance on the credit cards you have, that can be a heavy weight as well.

How do I improve my credit?

Not sure where to start on how to improve your credit? It’s easier than you think. The easiest and fastest way to build your credit is with a credit card. It has to do with how the FICO model is set up. That may strike fear in your heart if you’ve had a bad run with your finances. But breathe deeply and repeat this mantra: Pay on time and in full each month.

But first things first.

Right away, you’ll want to check your credit reports. The three major credit bureaus – Equifax, Experian and TransUnion – receive data on you from a variety of sources, primarily lenders. You can check each report for free once a year at AnnualCreditReport.com or check your TransUnion report at CreditCards.com. Plan to pull one of the three every four months. Pull your first one today.

Each report has a little different format, but the information is basically the same – your personal information, whether you are paying on time and which accounts you hold. Check for inaccuracies or accounts you don’t recognize. Contact the credit bureau with any issues, and clear up with the lenders any outstanding charges.

So, why do the credit reports matter? FICO uses them to assess your score. Actually, if you are regularly checking your credit reports and all is well, it isn’t necessary to frequently check your credit score.

Now, check your credit score through MyFICO.com, but make sure you buy only one score, not a monthly subscription. You don’t need to know every month where your score stands. It’s about $20 for one score. You can also check your Vantage score for free on CreditCards.com.

Finally, you’ll want to start looking at cards. We’ll talk in more detail about what to look for later, but suffice it to say that you need to keep in mind that your new financial product is for building credit ONLY, not a long-term loan. With that in mind, plan to make one small charge on your card each month to keep the account active, and pay in full and on time. Within a few short months your credit will improve.

What has the most effect on your credit score?

The most valuable aspect of the FICO scoring model, the model most used by lenders, is payment history, making up 35% of your score. That’s why it’s so important that you pay your bills on time each month. Here are the 5 main components of your FICO score:

  • Payment history – 35%. Pay on time each and every month!
  • Amounts owed – 30%. The second most important part of your score, this is why you want to pay your credit cards in full each month. That keeps your utilization ratio as close to 0% as possible. The utilization ratio is how much you owe by how much credit you have available. So, if you have $1,000 credit available and you owe $100, your ratio is at 10%. You want the ratio to be as low as possible.
  • Length of credit history – 15%. To a lesser extent, how long accounts have been open plays a role on your credit. FICO loves it when you have decade-old accounts with good paying habits.
  • New credit – 10%. Every time you apply for a credit card, the credit bureaus know. And if you apply for multiple cards in a short amount of time or just before you take out a loan, creditors start to wonder if you are desperate for cash. That’s why you should do your research on a card before applying, making sure you have the credit score to get it.
  • Credit mix – 10%. FICO likes it when you have different types of credit, maybe a credit card (called revolving credit) and an auto loan or mortgage (called an installment loan). That’s not to say that you should apply for an installment loan in your bid for good credit if you can’t afford it – good credit habits and a credit card should do the trick.

What’s the difference between my credit score and my credit report?

Your credit report is the accumulation of credit behavior in the last 7-10 years. Your credit score is a measurement of the data from the credit report.

Lenders send your credit data to the three major credit bureaus, TransUnion, Experian and Equifax. Each bureau generates a report, which includes personal information, such as your name and past addresses, your accounts and whether you paid bills on time.

FICO, the dominant score, uses a formula with 5 major components, including on-time payments, a debt-to-available-credit ratio, and other credit habits. The data for the components come from the credit reports. The FICO credit score is the scoring model most used by lenders to assess your lending risk.

How do I get a free credit report?

You can access your TransUnion credit report for free on CreditCard.com, or on the one site directed by federal law to release the 3 reports for free: AnnualCreditReport.com.

You are legally allowed to access each report for free once a year. Some credit experts recommend that you pull one of your reports every 4 months, staggering the requests.

AnnualCreditReport.com will ask for personal data, such as your birthdate and your social security number, ask you to choose which credit bureau’s report you want, then ask you a series of detailed questions only you would know, such as payment amounts for past loans, past addresses and other information. It helps to have this information handy when you pull a report. If you answer incorrectly, you may be shut out of the system for that bureau, and you may have to apply by snail mail.

The reports are compiled by the 3 major credit bureaus, TransUnion, Experian and Equifax, using data collected from lenders. They include personal information, such as your name(s), past addresses and payment history.

Check the report thoroughly for inaccurate information, such as unknown accounts. Request that the bureau correct any inaccurate information, preferably by snail mail, so that you don’t lose any negotiation rights.

What is the difference between a prepaid and a debit card?

A prepaid card acts like a credit card, but you “load” money in it periodically for spending purposes, so it isn’t truly a credit card, which lends you the money for charges. A debit card is a card attached to an account with cash in it. Neither the prepaid card nor the debit card helps your credit. For that you need a credit card.

There’s one type of credit card that is relatively easy to get, and can help you build your credit – the secured card. With this card, you pay a deposit and have a credit limit equal to the deposit, typically a small amount, such as $200.

Do prepaid cards help build credit?

Prepaid cards are not credit cards, and they don’t help you build credit. If you want to build credit, a secured credit card is a good start. Here’s how it works: You pay a refundable deposit of say, $200, and you basically borrow off of the amount. Just make sure you put a small charge on the card each month to keep the account open and active. And of course, pay in full and on time so that you take full advantage of your credit building. Also, make sure the card issuer reports to all three major credit bureaus, and research fees, because there can be some hidden ones.

Can you build up your credit with a debit card?

A debit card, which is attached to a bank account, cannot be used for building credit. Instead, consider a secured credit card.

With the secured card, you pay a refundable deposit in exchange for the ability to draw that amount for charges. This is an excellent way to build credit, provided you maintain good financial habits and the card issuer is reporting those habits to all three major credit bureaus.

Research thoroughly, because they can vary. There is even one secured card that pays you cash back, although that is of limited value while you are building credit, because you want to keep your charges as low as possible so that your credit utilization ratio remains as close to 0% as possible.

The credit utilization ratio is your balance compared to your available credit. So, if you have $200 in available credit and you owe $20, your ratio is 10%. This ratio makes up 30% of your FICO score.

What is the difference between a secured and an unsecured credit card?

A secured card requires a deposit that you borrow off of. An unsecured card provides you with a credit limit based on your credit score – the higher the score and income, the higher the limit typically is.

Secured cards are almost entirely for credit building. They have few other features, although a couple have no annual fee, such as the Discover it Secured Card, and the Capital One Secured Mastercard gives you access to a higher credit limit after 5 months of good credit habits. And the OpenSky Secured Visa Credit Card doesn’t require a credit check.

With the Discover it Secured Card, $200 or more will establish your credit line, then after 8 months, Discover reviews your account to assess whether your deposit can be returned while you continue to hold and use the card.

Unsecured cards have a multitude of features, from cash back to travel benefits to gas and shopping rewards. You usually need a higher credit limit for those kinds of cards, but there are exceptions, so do your research. There is the occasional unsecured card for credit building, but while your score is low, the annual fee can be up to $99.

While an unsecured rewards card can save you hundreds of dollars a year, they require some willpower and the ability to budget and manage your credit card accounts. You don’t want to get a card, borrow off of it and carry the balance month to month because you can’t afford to pay the bill in full. Make sure you have good credit habits before taking out a rewards card.

Do secured credit cards help your credit score?

Secured credit cards are an excellent way to build your credit score when it’s not at its best. That said, beware of fees and make sure the card issuer will report your credit habits to all three major credit bureaus.

Here’s how a secured card works: You pay a refundable deposit that you will be borrowing off of. Make sure you pay in full and on time each month and put a small charge on the card each month to keep the account open and active.

There aren’t many special benefits on a secured card, but if you build your credit over the course of a year, you should be able to get a rewards card once your FICO score is over 700.

How do I choose a credit card to build credit?

The easiest and fastest way to build credit is with a credit card. But if your credit isn’t its best, you may need to opt for a credit-builder card. Here are 5 things you need to know:

  • Even if you have a low credit score (under 600 out of 850), you may be able to get a credit card. Some card issuers require you to have a bank account, while others don’t even require a credit check. It’s best to research the card you have your eye on before applying to make sure you have a high likelihood of getting it.
  • Credit-builder cards can be secured, or in some cases, unsecured. With a secured card, you pay a refundable deposit of say, $200, in exchange for a credit limit of the same amount. While an unsecured card doesn’t require a deposit, check for fees, including annual fees. In fact, check for fees whether it is a secured or unsecured card. One credit-builder card charges $75 your initial year, then $48, and a monthly servicing fee after the first year, which can add up quickly.
  • Make sure the card issuer you want to apply to reports to the three major credit bureaus, so all that great behavior is recorded and your credit improves.
  • Some cards are forgiving with paying late or going over your limit, such as the Discover it Secured Credit Card. However, that shouldn’t be a deciding factor, because if you really want to improve your credit, you need to pay on time and in full each month, and never go over the limit, because if you do, you run the risk of losing your card, or worse, experiencing a drop in your credit score. Also, while a card may forgive the first late payment, don’t count on avoiding a fee the second or third time.
  • A few credit-builder cards offer cash back, which can be helpful once you’ve improved your credit and perhaps increased your credit limit. For example, with the Discover it Secured Card, you can earn 2% cash back on restaurants and gas stations up to $1,000 a quarter, plus double your cash back at the end of your first year. That means if you max the amount each quarter, you’ll earn $40 for the year, plus another $40, making it $80. Because there’s no annual fee, that money is free and clear provided you pay in full each month, thereby avoiding interest charges, and if you avoid penalty charges for violating the agreement.

Do bank accounts affect your credit score?

Technically bank accounts don’t affect your credit score, because they don’t report to the three major credit bureaus. However, your score can be impacted if you fail to pay fees and the financial institution sells your debt to a collection agency. If that happens, pay the bill immediately and ask the collection agency to inform the credit bureaus that you have done so.

Also, many financial institutions report to ChexSystems any negative information about your bank account. In most cases, you’ll need a clear report to open a new checking account. Heads up that banks also sometimes check your credit score before you open an account.

Do credit unions help you build credit?

While your checking account with your credit union won’t help you build credit, credit unions can help you build credit in a number of other ways including credit-builder loans and secured credit cards:

  • You might be able to get a secured credit card, which gives you a credit limit based on a refundable deposit you pay. If the card issuer reports to the three major credit bureaus, you will be able to build credit by paying in full and on time each month.
  • Some credit unions offer credit-builder loans. With an unsecured (meaning no collateral is needed) credit-builder loan you can pay a lump sum upfront that can be used for a car repair, new appliance or medical expense, according to CreditCard.com’s Allie Johnson. Another type, which freezes the loan proceeds until the total amount has been paid off, forces you to save.
  • Because FICO likes it when you have a variety of credit types, you might consider taking out a car loan with your credit union. The interest rates are usually more favorable, and it will give you access to an installment loan, which is different from a credit card, which has revolving credit. The FICO scoring model likes a variety of credit in your file.

How do you get a credit card with bad credit?

If you have bad, thin or no credit, don’t despair. There is a card for pretty much every circumstance, from great credit to none. You just need to make sure you apply for the right card for your credit. Here's what you need to know:

Check your credit at MyFICO.com for about $20 or get your Vantage score for free at CreditCards.com. If your score is below 700 out of a scale of 300-850, then look at fair or average credit cards. There are a few fair credit cards with cashback benefits, if you are looking for that. Anything below 600, and you’ll want to look at credit cards for bad or no credit.

Choose your card carefully, checking for fees and making sure the card issuer reports to all three major credit bureaus. Don’t apply for multiple cards in rapid succession, because that can drive down your credit score even further.

What are the advantages to getting a credit card?

There are 2 good reasons for getting a credit card: to build credit and for convenience. There is one reason for not getting a credit card – for a long-term loan. For that, look into a credit-builder loan with your credit union or another financial product with lower interest.

Using a credit card correctly is the fastest and easiest way to build credit. Simply put a small charge on the card each month and pay in full and on time. In no time, your credit will improve.

The other big advantage to getting a credit card is convenience. You can auto-debit on it, you can carry it with you to make big purchases, and you can use it to balance your budget. Just make sure you have the cash to pay the bill in full by month’s end.

But you don’t want to use it for a long-term loan, because the interest charges can kill you. With a 25% APR, if you have a $500 balance, it will take you 27 months to pay the minimum and cost you $153 in interest fees. Instead, only spend what you already have the money to repay.

What are the disadvantages to getting a credit card?

It can be a disadvantage to have a credit card if you aren’t prepared for it organizationally. If you haven’t figured out what you are going to put on the card, how much you will pay each month and when you will pay, you can run into trouble. That’s because you can relatively quickly build up debt, both with irresponsible charges and with accumulating interest charges.

Instead of spending with wild abandon, plan what you’re going to charge and how you are going to pay it back quickly. Only put on your card what you would buy anyway. It helps to have a budget, both for household expenses and for your credit card expenses.

With your first card, plan to only put one small charge on it each month and to pay it off in full and on time. This way, you are keeping the card active and building your credit, but you aren’t accumulating debt.

What are the different types of “bad credit” cards?

Bad credit doesn’t have to dog you. In fact, cards that accept consumers in the “bad” category can help you build your credit within months. Two different types of “bad credit” cards are secured cards and unsecured cards:

Secured card – The secured card is perhaps the best known type of card for people with bad credit. Here’s how it works: You pay a refundable deposit, say $200, then you are allowed to borrow off of that amount on your card. Some cards require you to have a bank account.

Unsecured card – An unsecured card is best known as a rewards, travel or cashback card, but in this case, it is a credit-builder card without the required deposit of a secured card. While the credit limit will likely be low, these cards can have small cashback benefits of about 1%.

Watch out for fees with both types of cards. You can be charged a servicing fee, an annual fee and other charges. Check the rates and fees link on the card’s landing page.

How do credit inquiries affect your credit score?

All credit inquiries are not created equal. There are “hard pulls,” which is when a creditor checks your credit, and they can affect your credit temporarily. “Soft pulls” do not.

If you are applying for a car loan or a mortgage, you can have up to 3 pulls within a certain amount of time, usually 30 days, without an impact to your credit. That’s because the credit bureaus recognize that you may want to shop for a better interest rate.

However, if you are applying for a credit card, you do not want to apply for multiple cards at once, because that most certainly will affect your credit. Instead, do your research and choose carefully, based on your current credit score and the details of the card, including fees.

How do I clear my bad credit history?

You can’t “clear” your bad credit history, but you can build good habits that improve your credit score.

Let’s say you were late on a couple of bills or you had an emergency medical procedure that you haven’t paid off. You may now have a bad credit history, and you’ll want to do something about that.

First things first: Check your credit report at AnnualCreditReport.com for free or get your TransUnion report for free at CreditCards.com. Look for errors, such as inaccurate personal information or accounts you don’t recognize. Get the credit bureaus to correct the errors as soon as possible.

Also look for negative issues, such as unpaid bills. Pay the bills immediately and ask the creditor to send the updated information to the credit bureaus. This negative activity will remain on your account for several years, but the older it is, the less important it is to your credit. If you begin to always pay on time and in full, your credit will improve in no time.

Finally, taking out a credit card is the fastest and easiest way to improve your credit. You will probably need to take out a secured credit card. Just make a small charge each month and pay it off on time, and your score will improve within months.

How to use a credit card wisely

There are a few rules to responsible card use. To use your credit card wisely, do this:

  • Don’t take out a credit card with an annual fee unless you need it to build credit or you are planning to maximize points or benefits.
  • Never carry a balance from month to month. Credit cards should not be used for long-term loans. Interest rates on credit cards average just over 16% APR, but credit-builder cards can be almost 25%. That means if you carry $500 on your card, it will take you 27 months to pay the minimum amount and you will pay $153 in interest.
  • If you are building credit, put a small charge on your card each month to keep the account active and open, and pay in full and on time.
  • Once you have built your credit to at least a FICO score of 700, only take out a rewards card if you have a working budget and you feel you can accurately track your charges and payments.

What is a good credit utilization ratio?

A good credit utilization ratio is as close to 0% as possible.

Credit utilization is your credit card balance by your available credit. So, if you have $1,000 in available credit, and you owe $300, then your credit utilization ratio is 30%. Some experts say you should try to keep your ratio under 30 percent, but the truth is, there is no hard and fast rule about this.

FICO doesn’t require a certain ratio; instead, it just wants the ratio to be a low as possible. That’s why it’s important to pay in full each month. In fact, some consumers pay in full multiple times a month, since you don’t know when during the month the card issuer will send your information to the credit bureaus.

How long does it take to build your credit?

In a few short months you can build your credit. The trick is to be diligent about paying in full and on time.

You want to shoot for a FICO score of at least 700 out of a scale of 300-850, with 850 as the best. FICO is the scoring model most used by lenders.

To achieve that score, take out a free credit report every four months from AnnualCreditReport.com and check for errors or any missed payments. You can also check your TransUnion report for free at CreditCards.com. Have errors corrected and pay any outstanding bills you have.

With a secured credit card, and consistent, monthly payments, your credit will improve in no time. Check your score at the beginning of your journey and again in about a year. You can check for about $20 at MyFICO.com or check your Vantage score for free at CreditCards.com.

Is it bad to cancel credit cards?

Canceling a credit card is not necessarily a bad thing, but you want to do it for the right reasons.

Here’s the deal: FICO looks at how long your credit accounts have been active. The longer they’ve been in place (and well-cared for), the better. For that reason alone, you don’t want to cancel your card. Length of credit history makes up 15% of your FICO score.

Another reason to keep that card: The available credit on the card adds to the available credit of your other cards, allowing you to have a higher balance and still have a good utilization ratio, which is 30% of your FICO score.

Also, if it’s your only credit card, and you are handling it responsibly, it will continue to boost your credit score because it improves your credit mix, which is 10% of your FICO score.

However, if you are paying an annual fee, you have other cards, and there is no reason for that card (for example, you don’t use the card’s travel benefits and you have a very low utilization ratio), you might consider canceling. The good habits of that card’s use will remain on your credit reports for 10 years.

Is a credit card right for me?

If you are interested in getting a credit card, but you aren’t sure if they’re right for you, ask yourself these 6 questions:

  • Do you need to build your credit? The easiest and fastest way to build credit is through responsible use of a credit card. If you are trying to improve your credit, a credit card may be the best option. New to credit? Try a secured card.
  • Do you have a tendency to overbuy? If your purchasing habits are shaky, it may be best to get your finances under control before getting a credit card. Start with creating a realistic budget, with room for saving and fun. Once you have lived within your budget for several months, you may be ready for a card.
  • Are you interested in getting a rewards card? Rewards cards, whether travel or cash back, are a great way to save hundreds of dollars a year if used correctly and to get excellent card benefits. But you need practice paying for a simpler credit card before diving into rewards.
  • Do you like the idea of the convenience? Credit cards are a great way to manage your finances, pay for items you already have the money for and build credit along the way.
  • Do you need cash soon? If you see a credit card as a way to pay for items you don’t already have the money for, then don’t get one. Credit cards aren’t ideal for long-term loans – they can make a bad financial situation worse within months – rather, they should be used for building credit and convenience. If you don’t have the money for the items you want to buy, don’t make that purchase.
  • Have you accumulated credit card debt? If you have already accumulated credit card debt, you need to immediately make a plan for paying it off, because the longer you wait, the more you’ll pay in the end because of interest charges. One way is to use a balance transfer card with a 0% APR intro offer, but it’s critical to pay off the debt before the offer ends. If you don’t qualify for a balance transfer card (many require good or excellent credit), you still need to make a plan to pay down the debt, because card debt is a critical part of your FICO score.

Featured Credit Cards for Bad Credit: October 2017