Comparing the best credit cards for bad credit
Okay, so your credit isn’t at 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 one of the best and fastest ways to rebuild 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. Plus, we’ll identify the best credit cards for bad credit.
Editor’s picks: Credit cards for bad credit details
Capital One Platinum Secured Credit Card: Best for flexible security deposits
Why we picked it: The Capital One Platinum Secured Credit Card is one of the only secured cards that allows your initial credit limit to be higher than your security deposit (if you qualify). The required refundable security deposit ranges from $49 to $200, depending on your credit. Your initial credit limit ranges from $200 to $1,000, depending on your deposit.
Pros: There’s no annual fee and, after six on-time monthly payments, you’ll automatically be considered for a higher credit line, which could boost your credit.
Cons: The variable 26.99% APR is on the high side, so you’ll want to avoid carrying a balance on this card. There are no rewards, which is common among credit cards for bad credit. However, there are a few secured cards on the market that offer modest rewards.
Who should apply? If you’re looking to minimize the costs associated with getting a credit card with bad credit, this is a great option. On top of the low security deposit requirements, the card doesn’t charge an annual fee or foreign transaction fees.
Who should skip? If you have your heart set on earning rewards, consider alternatives like the Discover it® Secured Credit Card or the Credit One Bank® Platinum Visa® for Rebuilding Credit.
Read our full Capital One Platinum Secured Credit Card review.
Mission Lane Visa® Credit Card: Best for global acceptance
Why we picked it: The Mission Lane Visa® Credit Card is a relatively low-cost unsecured credit card for people with bad credit, given it doesn’t charge monthly maintenance or activation fees. As an unsecured credit card, it also doesn’t require an upfront security deposit.
Pros: The issuer will review your account after six months of on-time payments to see if you’re eligible for a credit limit increase. All cardholders start with a minimum credit limit of $300.
Cons: That minimum credit limit is pretty low and the variable 29.99% APR is high, even for this card category, so you’ll want to avoid carrying a balance on this card (a best practice in general if you’re trying to build credit.) There’s a $59 annual fee, though that is lower compared to some other cards in this category.
Who should apply? If you have bad credit and are hoping to obtain an unsecured credit card, the Mission Lane Visa is an option.
Who should skip? If you have even fair credit, you could potentially qualify for a card with more favorable terms and conditions. See the best credit cards for fair credit.
Read our full Mission Lane Visa® Credit Card review.
Discover it® Secured Credit Card: Best for cash back
Why we picked it: This card offers rewards, which isn’t common among credit cards for bad credit. Cardholders get 2% cash back at gas stations and at restaurants (up to $1,000 in combined purchases per quarter, then 1%).
Pros: This is another decidedly consumer-friendly credit card for bad credit applicants. Discover doesn’t charge an annual fee, foreign transaction fees or a penalty APR. It also waives a first late payment fee (up to $40 after that), though missed payments will still affect your credit score and should be avoided.
Cons: The ongoing APR on purchases (22.99% variable) is high even for a secured card. Rewards are great so long as you can resist the urge to overspend. If you wind up carrying a balance, you’ll lose rewards to interest and potentially hurt your credit utilization rate and credit score.
Who should apply? If you’re in the market for a secured credit card (or your credit is only likely to qualify for a secured credit card), consider the Discover it Secured Credit Card a prime pick.
Who should skip? If you suspect the opportunity to earn rewards will prove distracting, consider a no-frills secured credit card, like the Capital One Platinum Secured Credit Card.
Read our full Discover it® Secured Credit Card review.
Credit One Bank® Platinum Visa® for Rebuilding Credit: Best for unsecured credit + rewards
Why we picked it: The annual fee on this card for bad credit is high ($75 the first year, then $99 annually billed at $8.25 per month), but it’s an option for people with bad credit who want to earn rewards and avoid putting down an upfront security deposit.
Pros: You’ll receive 1% cash back on eligible purchases including gas, groceries and mobile phone/internet/cable/satellite tv services (terms apply).
Cons: This card is expensive to hold, particularly in the second year where the annual fee rises from $75 to $99. The variable 23.99% APR is also high and your credit limit could be quite low (the minimum credit limit is $300), so you don’t want to carry a balance on this card.
Who should apply? This is an option if you’re looking to avoid putting down an upfront security deposit, given it’s an unsecured credit card designed for people with bad credit.
Who should skip? If you have bad credit, but your heart is set on earning rewards, this Credit One card does have a cash back program. However, if your credit is already on the rebound and entering fair territory, it’s best to shop around.
Read our full Credit One Bank® Platinum Visa® for Rebuilding Credit review.
OpenSky® Secured Visa® Credit Card: Best for no credit check
Why we picked it: The card doesn’t require a credit check, so you won’t risk your score in applying. You don’t even need a bank account: You can pay your security deposit (up to $3,000) via check, Western Union or money order.
Pros: If you need to carry a balance, the card’s 17.39% (variable) APR is relatively low. If you have extra funds to put down, you could secure a credit limit as high as $3,000, which can be helpful in building your credit score as (provided you don’t carry a big balance) a high limit can improve your credit utilization rate.
Cons: The card does charge a $35 annual fee and lacks any rewards-earning capabilities.
Who should apply? The card is a good option for people with bad credit who anticipate carrying a balance from time to time, as its APR is one the lower side for this card category.
Who should skip? If you’re looking to earn rewards, look into other options, like the Discover it® Secured Credit Card.
Read our full OpenSky® Secured Visa® Credit Card review.
Self – Credit Builder Account + Secured Visa® Credit Card: Best financial product for establishing credit
Why we picked it: The Self – Credit Builder Account + Secured Visa Credit Card doesn’t require a credit history. You start out with a credit-builder account, but will automatically be eligible for the secured credit card once you’ve made three consecutive monthly payments on time, have at least $100 in savings and are in good standing.
Pros: You also enjoy features like credit monitoring and account alerts to help you stay on track. Your payments are reported to the three credit bureaus, and unlike other secured card options, your repaired credit could be stronger since this loan-and-card combo helps build a credit mix – worth 10% of a good credit score.
Cons: You’ll pay a monthly fee, plus an administrative fee, for the account (terms will vary) and you’ll have to wait until your 12- to 24-month payments are complete to receive your deposit.
Who should apply? This hybrid product could be a good option for people who can’t afford to put down a large upfront security deposit or people who want to be forced to save some money while they build their credit.
Who should skip? Anyone who is looking for a credit card in short order should pursue other options as you’ll need to make at least three consecutive on-time monthly payments on the personal loan (and meet the criteria mentioned above) before qualifying for the secured credit card.
Read our full Self – Credit Builder Account + Secured Visa® Credit Card review.
Summary of the best credit cards for bad credit
|Credit Card||Best for||Annual Fee||Deposit Requirement|
|Capital One Platinum Secured Credit Card||Flexible security deposits||$0||$49-$200|
|Mission Lane Visa® Credit Card||Best for global acceptance||$59||$0|
|Discover it® Secured Credit Card||Cash back||$0||$200-$2,500|
|Credit One Bank® Platinum Visa® for Rebuilding Credit||Best for unsecured credit + rewards||$75 for the first year. After that, $99 annually ($8.25 per month)||$0|
|OpenSky® Secured Visa® Credit Card||No credit check||$35||$200-$3,000|
|Self – Credit Builder Account + Secured Visa Credit Card||Establishing Credit||$25 monthly payment, 24 month term with a $9 admin fee||$0|
What is bad credit?
A “bad credit” score is typically under 580 out of a range of 300 to 850 as defined by FICO, with 850 being the best possible score. Using the same 300 to 850 scale, a VantageScore defines “poor credit” as a credit score under 600. In the eyes of financial institutions, a bad credit score represents a risky or unproven consumer. Typically, bad credit originates from one of the following:
- Credit card or loan defaults: Failing to pay off credit card bills or pay back a loan – also known as defaulting – marks you as a clear credit risk to lenders.
- Late payments: Your payment history accounts for 35% of your credit score. If you’re late with your payments – on credit cards, student loans or mortgages – your credit will take a big hit.
- Maxing out your cards: Credit utilization – the amount you’ve borrowed compared to your total available credit – accounts for another 30% of your score. The lower your credit utilization, the better.
- Charge offs: When a creditor decides you have no intention of paying back your debt and stops collection attempts, your account becomes charged off.
- Bankruptcy: While it’s sometimes your only option to get out of debt, bankruptcy is a credit score disaster, and should only be used as a last resort.
- Foreclosure: The higher your starting credit score, the bigger a drop you’ll see as a result of foreclosure.
- Judgments: Judgments show lenders that the court system had to force you to pay off your debt. Be sure to settle your debts, as an unpaid judgment is worse than a paid judgment.
Bad credit can lead to several obstacles. You could face higher interest rates, trouble with financing approval, difficulty renting an apartment, higher insurance premiums and even issues when applying for certain jobs. Luckily, understanding bad credit scores is often the first step to improvement.
Why improving your bad credit is important
Just as bad credit hinders what you can do, good credit can open doors to new possibilities. These include:
- Interest savings. When taking out a loan to finance a home or car, the slightest difference in interest rate can cost thousands over the lifetime of the loan. The better your credit score, the more likely you are to be approved for the best rate.
- Better terms. A good credit score can also earn you more generous payment schedules and credit limits.
- Access to top credit cards. Cards with lucrative rewards, friendlier interest rates and can’t-miss sign-up bonuses are available to people with good credit. (Check out the best credit cards for good credit.)
- Save on insurance. A good score may qualify you for lower premiums on car insurance.
- Better financial reputation. Some landlords, rental management companies, utility companies and potential employers look at your credit score. Your score is meant to show how financially trustworthy you are, so being in good standing will protect you from any hassle.
What to look out for in a credit card for bad credit
With a proper amount of research and consideration, a credit card for bad credit can be a lifeline for rebuilding your credit. However, you need to do your research. Some credit cards for bad credit compensate for riskier lending with high APRs and harsh penalties. Especially if you’re inexperienced when it comes to credit, you should weigh the benefits against potential pitfalls.
Here are the key elements to keep in mind when evaluating credit cards for bad credit:
- Fees: Credit cards for people with bad credit tend to carry a lot of fees, so take note of any annual fees, program fees, inactive account fees, or any others. To find the info you need, take a look at the card’s rates and fees on the application page: Primary fees – late fee, foreign transaction, etc. – are shown at the top of the document (called the Schumer Box), but keep an eye out for lesser-known fees appearing further down in the text.
- APR: Cards for bad credit often bring along high interest rates and in an unfortunate situation – penalty APRs. As such, getting the lowest rate possible should be one of your top priorities if you know you’ll carry a balance.
- Minimum/maximum security deposit: If your card requires a deposit, check the range offered to see if it makes sense. Can you afford to tie up $1,000?
- Credit limit: You’ll want to be sure the card offers a limit that’s high enough to allow you to keep your credit utilization low.
- Be wary of targeted mailers: Watch out for mailings that target your situation. Banks have been found to send these disproportionally to people with less formal education.
How to get a credit card with bad credit
If you’ve made a few financial mistakes or don’t have a credit history, you may be wondering if it’s even possible for you to get accepted for a credit card. It is, but here are a few steps you can take to increase your odds of approval.
- Check your credit report. Before you begin browsing and applying, it’s important to know where you stand. Even if your credit is poor, knowing how close you are to having fair credit allows you to decide whether you should apply now or wait until you’ve given your credit a boost and have better options. The 3 major credit bureaus are legally required to give you a free credit report at least once per year. You can request yours online, by phone or by mail.
- Dispute any fraudulent or incorrect activity. If your credit score is surprisingly low, you may want to do some investigating. It’s possible that fraud or mistakes are wrongfully affecting your credit. If you find mistakes, be sure to dispute the incorrect items on your credit report.
- Pay down any debt if you’re able. One of the major factors that go into your credit score is your credit utilization ratio. A high utilization ratio can lower your credit score, so it’s a good idea to pay down existing balances before you apply for a new credit card.
- Look for a card that matches your situation. Once you’ve done your research and feel comfortable with your standing, it’s time to start browsing credit cards. Be sure to pick a card with credit requirements you can satisfy. That is, don’t waste time looking at or applying for cards that require good credit if yours isn’t quite there yet.
The cards at the top of this page have low credit requirements. Secured credit cards are another great option for applicants with bad credit. They require a one-time, refundable security deposit and some even offer rewards.
How to improve your credit using a credit card
When used correctly, a credit card can be an extremely useful tool for building a credit history. Getting into the habit of managing your money and making payments on time can do wonders.
Your credit score is made up of five factors: payment history, credit utilization, credit history, credit mix and new credit. Opening up a new credit card can impact all five, and continued responsible use will strongly influence your payment history and credit utilization, the most heavily weighted factors.
With some discipline and regular payments, you can improve your credit score using a credit card in just a few months. Be sure to set up autopay or calendar reminders so you don’t miss a due date. Also, while it may require cutting down on spending, avoid carrying a balance with your credit card to keep your utilization low and send your score in the right direction. Paying down your balance should be a top priority for more reasons than one – unwanted interest charges can be a major obstacle on the route to financial wellness.
Simply put, if you can use a credit card as intended (paying for purchases, making timely payments, avoiding falling into debt, etc.), you should see improvements in your credit score. Just know that late payments and other mistakes can linger around on your credit history, so sticking to the proper habits is crucial.
What to do if your application is denied
Luckily, you won’t be left in the dark on the “why,” as issuers are legally required to send you an adverse action notice explaining why you were denied.
Here are some common reasons for denial and what you can do about them:
- Too much debt – Your balances are too high. Make a budget and pay more than the minimum each month to pay down your existing debt.
- Limited credit history – Wait a couple of months, then apply for a secured card designed for credit building. Within months, your score will improve with on-time payments.
- Low income – Next time, try a card that is not a premium product, but has the features you are looking for.
- Too many applications – Take a break from applying for cards for several months and focus on building your credit with a credit-builder loan.
- Too young – People under 21 must have an independent source of income to get a card, but you can be an authorized user and still build credit
- Negative information on credit reports – Late payments or judgments, such as bankruptcies, take time to drop off your reports. Just pay on time and in full going forward.
- Score too low – If the issue is your credit score, you can look at a credit-builder loan at your credit union. About 1 in 5 credit unions offer credit-builder loans.
Secured vs. unsecured credit cards for bad credit
There are two main types of cards to consider when you’re looking for a credit card with bad credit: secured and unsecured cards. Both can be a useful tool in your credit-rebuilding efforts.
Secured credit cards
Secured cards require a refundable deposit, which is usually equal to your credit limit. With many cards, after 6-12 months of on-time payments, you should be able to get your deposit back and graduate to a traditional (unsecured) credit card with a higher limit.
Examples of secured credit cards for bad credit:
|Card||Credit Recommended||Annual Fee|
|Capital One Platinum Secured Credit Card||Limited/No Credit||$0|
|Discover it® Secured Credit Card||Limited/No Credit||$0|
|First Progress Platinum Prestige Mastercard® Secured Credit Card||Bad Credit||$49|
|OpenSky Secured Visa Credit Card||No Credit Check||$35|
Unsecured credit cards
An unsecured credit card, as the name implies, offers an “unsecured” line of credit, so you won’t have to put down a security deposit to borrow money. You’re given a credit limit based on your creditworthiness and can borrow up to that amount. A high credit limit will also likely improve your credit score by helping your credit utilization.
Examples of unsecured credit cards for bad credit:
|Card||Credit Recommended||Annual Fee|
|Total Visa Unsecured Credit Card||Bad/Fair Credit||See Terms|
|Credit One Bank® Platinum Visa® for Rebuilding Credit||Bad Credit||$75 for the first year. After that, $99 annually ($8.25 per month)|
Research methodology: How we got to our top picks
We evaluated 269 credit cards for bad credit to identify the top products in this category. Core criteria we considered in our analysis include:
- Costs and fees: Credit cards for bad credit often carry upfront costs, including annual fees and security deposits. They also sometimes carry hidden fees for items like replacement cards. We gave more weight to cards with lower and/or limited fees.
- APRs: Credit cards for bad credit often carry higher interest rates, given applicants generally represent more of a credit risk. However, we still evaluated whether a card’s APRs were competitive for this category and how they stacked up relevant to the current industry average.
- Rewards: Although a poor credit score won’t let you get top-notch rewards, several options here allow you to earn on your spending. (Note: Consider avoiding cards with rewards if you fear they will entice you to overspend.)
- Added benefits: Many cards offer the ability to increase your credit limit, tools to track your credit score, added security, regular reporting to the major credit bureaus and more. Some of these benefits can really help you build your credit score.
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