If you have fair or poor credit, you can still get a credit card. Find out about your options — and what might be the best type of card for you.
When you have bad credit you may believe you’re ineligible for any new credit card. But accounts are available to people with all kinds of credit profiles, from exemplary to poor. The key is to pursue the credit card that matches your creditworthiness and also fits your needs and lifestyle. Once you have the card you can make safe financial transactions and rebuild your credit so you’re eligible for an even wider variety of credit products in the future.
Here’s how to get a credit card when your credit is bad, and some simple ways to raise your rating before you apply.
What is bad credit?
Having bad credit means you’re a high-risk borrower due to past financial behavior. Maybe you’ve been delinquent on credit card or loan payments, or have maxed out your credit lines.
In more extreme cases you may have not satisfied debts at all, resulting in defaults, collection accounts, or bankruptcy. All such activity is listed on your consumer credit reports, developed by TransUnion, Equifax, and Experian.
To know the status of your credit rating, check your credit scores. Two of the most common are FICO scores and VantageScores. On a monthly basis, they calculate the information that appears on your credit reports, transforming it into risk scores ranging from 300 to 850. The lower your scores, the worse your credit is.
Be aware that credit scoring companies do not use the word “bad” to describe a consumer’s credit rating, though a lender may consider any score that’s not good as bad.
With FICO, the most important, your credit will be problematic if your number falls below 670. A poor FICO Score is 300 to 579, while a fair FICO score is 580 to 669.
A risky VantageScore is anything under 660. A score of 300 to 499 is considered very poor, 500 to 600 is poor and 601 to 660 is fair.
Each scoring system is slightly different, but payment history is most important for both, then the amount of debt you carry among a variety of revolving accounts over a long period of time.
What type of credit card can you get with bad credit?
Focus your attention on credit cards designed for people with credit scores that are fair or below. You have a number of options to explore:
These cards function just like unsecured credit cards except you put down a cash deposit that guarantees the credit line. If you fall behind on payments, the issuer can claim the money owed from the funds held in deposit. Luckily, there are plenty of secured cards to choose from.
Many, like the Citi® Secured Mastercard®, don’t offer rewards programs. A few do, though, including the Capital One Quicksilver Secured Cash Rewards Credit Card which offers unlimited 1.5% cash back on every purchase.
Depending on the issuer, it may automatically be converted into an unsecured account if you manage the card well for a certain number of months. At that point you will get your deposit back. In other cases, you will get your deposit back when you close the card with a zero balance due.
You may also open an unsecured credit card that is marketed to people with low credit scores. The credit limits for these subprime cards are typically short, but can grow over time with responsible use. Though a few come with rewards programs, many do not. For example, the Avant Credit Card doesn’t offer rewards, but Capital One Walmart Rewards® Mastercard® allows you to earn between 1% and 5% cash back depending on where you use it.
Commonly known as store cards or retail cards, credit cards you can only use at specific retailers can have more forgiving qualification standards than general purpose cards you can use anywhere. Department stores such as Kohl’s, JCPenney and Dillards will consider credit card applicants with fair credit. If your credit scores are very low, the Fingerhut Credit Account may work for you. Retails cards often charge high interest rates, so be careful to pay your balance in full each month.
Credit union card
One benefit of being a credit union member is that they may grant you an unsecured credit card even if you have credit problems. There are a number of credit union credit cards that anyone can get. To apply, you would have to become a member of the credit union, which just entails opening a savings or checking account. These nonprofit financial institutions have a mission to help their members get ahead, which can include rebuilding credit.
Other options you have
Become an authorized user
Yet another way to get a credit card is to piggyback on another person’s account. You may have a relative or close friend with good credit who is willing to let you charge on their account by making you an authorized user.
As an authorized user, you would receive a card imprinted with your name that you can use. The issuer would not hold you responsible for the payments but it will show up on your credit report. As long as all the payments are made on time and you keep the balance low, it will help you build your credit rating.
Improve your credit before applying
You may want a new credit card right now, despite having bad credit. Your choices will be more open, though, if you improve your credit before starting the application process. Access your credit reports from AnnualCreditReport.com to see what is holding you back, then take action to move forward.
- Change behavior. If you have credit cards with high balances, your credit utilization ratio is off – and it’s hurting your credit. Pay the debt down so your balances are under 30% of the limit on individual cards as well as in total. If you see delinquencies, start paying your accounts by due dates again. Late payments will stay on your reports for seven years, but recent activity matters more than old activity.
- Add positives. Consider a credit-builder loan. You would borrow money but the funds would remain with the lender. When you’ve repaid the loan, you’ll get the money and a better-looking credit report due to your steady payments. Or, add non-credit accounts to your report. With Experian’s free Boost program you can include your regular utility and cell phone bills to your report. By making those payments on time, you can add points to your scores, and may be able to edge them into “good” standing.
- Remove negatives. Collection accounts will appear on your credit reports for seven years, but if you satisfy the debt, the most recent versions of FICO Scores and VantageScore will not include them in their calculations. If misinformation is appearing on your credit report and dragging your numbers down, file a dispute with the credit reporting agencies. After they’re gone, your scores will rise.
Bad credit shouldn’t hold you back from getting a good credit card. Once you’ve identified the best card for you, apply, then use it advantageously.
No matter the card or issuer, the rules are the same: Charge at least once a month to ensure that a steady supply of information is added to your credit reports, pay by the due date and keep the balance to zero or very low. Over time you’ll prove that you really are a great credit risk after all.