Best Credit Cards for Bad Credit

Best for soft credit pull + unsecured credit: Mission Lane Visa® Credit Card

• Best features: 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.
• Biggest drawbacks: That minimum credit limit is pretty low and the variable 26.99% – 29.99% APR range is high. So you’ll want to avoid carrying a balance on this card.
• Alternative: The Discover it® Secured Credit Card helps you build credit while also earning cash back on gas and restaurant purchases.
• Bottom line:  If you have bad credit, the Mission Lane Visa is an option. But once you reach 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.

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. Check out our credit utilization calculator to calculate yours today.
• 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.

Pros and cons of a credit card for bad credit

How to choose a credit card for bad credit

What to look out for in a credit card for bad credit

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. 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. Make sure to look at the card’s rates and fees on the application page. Primary fees, such as late fee and foreign transaction fee 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 works for you. 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.

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 to 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:

Unsecured credit cards

An unsecured credit card won’t require you 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:

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.

1. Check your credit report. 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 required to report at least once per year. You can request yours online, by phone or by mail.
2. Dispute any fraudulent or incorrect activity. If your credit score is surprisingly low, you may want to do some investigating. Mistakes are common on credit reports, and it’s possible that a mishap or fraud is wrongfully affecting your credit. If you find mistakes, be sure to dispute the incorrect items on your credit report.
3. 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.
4. Look for a card that matches your situation. Once you’ve done your research, 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 do have low credit requirements, though it’s important to note that if you are currently in bankruptcy or foreclosure, have a recent history of bankruptcy, or are currently delinquent or in default on other accounts, your application will most likely be denied. In these cases, secured credit cards are a better option. They require a one-time, refundable security deposit and some even offer rewards.

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. With substantial outstanding debt, card providers may be hesitant to take you on as a cardholder. Make a budget and pay more than the minimum each month to pay down your existing debt. It’s sometimes easier said than done, but making regular payments is a surefire way to help your credit score through improving your utilization and payment history.
• 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. After showing that you’re a reliable cardholder, you’ll likely graduate to an unsecured option or will have obtained the credit necessary for another card of your choice.
• Low income – Plenty of cards for bad credit will allow for low income, so you should have other viable options. When providing proof of income to a card provider as part of the application process, keep in mind that non-traditional income like income from a partner or retirement fund distributions counts as income on a credit card application..
• Too many applications – Take a break from applying for cards for several months and focus on building your credit with a credit-builder loan. Applying for cards multiple times within a small window can actually hurt your credit score. Look for cards that offer prequalification the next time you plan on applying.
• Too young – People under 21 must have an independent source of income to get a card, which can make the application process difficult. Through a parent or guardian, people younger than 21 can become authorized users on credit cards and have the chance to boost their credit beforehand. Also, top student cards are often great options for young adults.
• Negative information on credit reports – Late payments or judgments, such as bankruptcies, take time to drop off your reports. If you’re committed to getting a credit card, however, exploring your options might lead you to a choice that allows for bankruptcy or a less-than-ideal payment history. Just pay on time and in full going forward. You should also look at your credit report to see if there are any errors or fraudulent information.
• 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. When approved for a loan, the same principles of being a good cardholder apply. Routinely making timely, sufficient payments will go a long way.

If you were denied a credit card but feel that you met the requirements, you can always contact the provider and ask to speak with their reconsideration department for another chance. Taking this step is no guarantee that you’ll be approved, but just asking to be re-evaluated could get you somewhere. Providers typically see taking initiative as a good sign, and plenty have been known to approve applicants who were previously denied.

In the news: How to live on credit cards during an emergency 

Emergencies happen. And when they do, it’s always a good idea to have money set aside. An emergency fund is your best option because it protects you from having to rely on loans when surprises happen.

Without an emergency fund, you risk falling into or falling further into debt since borrowing money typically comes with interest charges and other fees. To make matters worse, when you have bad credit, you will have a harder time qualifying for loans to help you out of an emergency. And without adequate access to funds, you may feel like you have no choice but to settle for predatory lending options like payday loans. But these loans may come with interest rates that can soar over 600%.

A credit card can’t take the place of an emergency fund. But if you don’t have that savings, it can be a lifeline to help out when an emergency happens. Erica Sandberg has a step-by-step guide that explains how to use credit cards during an emergency.

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.

More information on credit cards

For more information on all things credit cards, continue reading content from our credit card experts:

• 13 bad credit habits you need to break now
• How to get a credit card with bad credit?
• The factors of a FICO credit score
• How to do a balance transfer when you have bad credit