It’s possible to qualify for a credit card if you have bad credit, especially if you’re currently employed. But you need to be selective, because submitting a whole bunch of credit card applications all at once would backfire. Here are some suggestions.
In this column, I’m going to tackle a question from Gina, a reader who posed a question that I believe many people can relate to.
First and foremost, I currently do not have good credit.
I recently got a new job, however, that will make it much easier to make payments on time and in full.
Because of the COVID-19 pandemic, I need to be able to work from home, but I do not have a laptop to do so. I was interested in getting a laptop but do not want to spend all the money upfront during this time. I need to apply for a credit card that will accept my bad credit, so I can use that card to buy a laptop, in order to keep working from home which will allow me to pay the credit card back on time and in full.
I was wondering if you could recommend a card that would work for me.
Thanks for writing, Gina. I suggest Apple Card as a starting point – a lot of people with lower credit scores get approved for this card.
An added advantage is that Apple will let you know if you’ve been approved or denied with only a soft credit inquiry (which does not affect your score). If you’re approved, you can even see your interest rate and credit limit before deciding whether or not to proceed.
Another way to evaluate potential fits for your situation without a formal application or hard credit inquiry is to use our CardMatch tool.
I’m especially concerned about the credit score impacts for two reasons. One is that card issuers have gotten much stricter with their lending standards due to the economic effects of the pandemic. They’re nervous that so many people are suddenly out of work and therefore may have trouble paying their bills.
The Labor Department reported a record 3.3 million initial unemployment claims for the week ending March 21, and then the record was shattered the following week, with 6.6 million new claims. Our economy has never collapsed this suddenly (we can only hope the recovery will be just as swift).
As recently as a few weeks ago, credit card offers were much more abundant. Normally, I would suggest a 0% introductory APR card to someone in your situation, Gina. That approach still might work, you just need to be careful. With a credit score below 700, it’s going to be tough to get approved these days.
That brings me to the second thing that worries me about applying for a credit card with a low credit score: you could well be declined. And each formal credit application places a hard inquiry on your credit report. This usually trims a few points off your credit score – points you can ill-afford to lose – and too many hard inquiries can flash a warning sign to lenders.
You need to be selective because submitting a whole bunch of credit card applications all at once would backfire. That’s why I think starting with the two soft inquiry approaches, Apple Card and CardMatch, is best.
Your income matters more than your credit score
While your credit score admittedly isn’t great, Gina, the good news is that you have a new job. Income is a key component of credit card applications, along with other factors such as your debt-to-income ratio and your credit score. Others reading this may have a better credit score but little to no income right now.
I’m sorry to tell those people that I believe your income has an even greater impact on a credit card approval decision than your credit score. That’s largely because the CARD Act requires card companies to assess your ability to repay.
That’s a very well-intentioned provision that helps people avoid high-cost debt, but a hindrance nonetheless if you’re looking for credit to tide you over during a (hopefully) short bout of unemployment.
Back to your situation, Gina: Beyond the Apple Card and CardMatch advice, I would also suggest credit unions. They often charge lower interest rates than banks, and their approval process can be more forgiving.
Credit union rates are capped by law at 18%. So if you can get approved, your worst-case APR is about seven percentage points lower than the average APR for cards marketed to people with bad credit (24.62%, as of April 1). It’s much more in line with the average low end of the APR range on 100 popular credit cards (16.27%) – as in, the average charged to people with stronger credit. Good luck!
Have a question about credit cards? Email me at email@example.com and I’d be happy to help.