You can get a credit card even with bad credit, but practicing responsible credit card use with one is a top priority.
Your credit score helps you access a variety of financial products – including credit cards – but having a bad credit score can hold you back from the best products. While you can get a credit card with bad credit, it’s recommended that you improve your credit score first.
“While you may qualify for a credit card with poor credit scores, you will pay much higher interest rates and potentially other fees and have a low credit limit,” said Rod Griffin, Experian’s senior director of consumer education and advocacy. “The average interest rate for credit cards is roughly 16% to 17% today, but if you have poor credit scores, you will likely pay interest rates as high as 25% or more.”
However, sometimes a bad credit credit card is needed to improve credit scores and access better terms, fees and rates on credit cards. Here’s how to get a credit card with bad credit and how to qualify for them.
What is bad credit?
Bad credit scores are typically caused by things like missing payments on debts, defaulting on loans, bankruptcy or maxing out your credit cards. However, losing a job or going through a divorce can strain your finances and put you in a bind, further affecting your credit scores.
The bulk of your credit score comes from financial data your lenders report to the three major credit bureaus: Equifax, Experian and TransUnion. If you don’t have any forms of credit like student loans, auto loans, credit cards or a mortgage, you probably have no credit score reported with any of the three credit bureaus.
Without data detailing your payment history, how much of your credit limit you are using, how long you’ve been using credit, what types of credit you have used and how many new accounts are in your credit report, the credit scoring models cannot calculate a score.
Both FICO and VantageScore depend on data from the three credit bureaus – Equifax, Experian and TransUnion – and use a weighted system to measure credit scores, ranging from 300 to 850.
FICO’s ranges are broken down into five credit tiers:
- Under 580 is poor
- 580 to 669 is fair
- 670 to 739 is good
- 740 to 799 is very good
- Above 800 is exceptional
VantageScore also uses five score ranges:
- 300-499 is very poor
- 500-600 is poor
- 601-660 is fair
- 661-780 is good
- 781-850 is excellent
The cost of credit cards for bad credit
People with bad credit can expect to pay more for the privilege of using a credit card. First, interest rates are typically higher on credit cards when you have bad credit, so balances carried from month to month are charged more interest than average.
Next, some credit cards geared for people with bad credit scores come with annual fees, but no rewards or extra perks to offset the cost, so cardholders pay for using the card without earning rewards.
Finally, secured credit cards for bad credit require a deposit, paid upfront, that equals the credit limit and acts as security for the issuer should the cardholder default on credit card payments.
These costs are solely for the benefit of the card issuer. But if you get a credit card for bad credit, you can use the opportunity to improve your credit score and apply for better cards.
How to get a credit card with bad credit
1. Check your credit report and score
In determining how to get a credit card with bad credit, the first thing you should do is check your credit reports. You can get a free copy of your credit report every 12 months from each of the bureaus at AnnualCreditReport.com. The three credit bureaus are also offering free credit reports on a weekly basis through April 2022.
Many card issuers, banks and websites also offer free credit reports, including:
- American Express
- Wells Fargo
Review your credit report carefully to be sure the information is accurate and that there are no negative items more than seven years old. Follow the dispute process to have your credit report corrected if there are any inaccuracies.
2. Apply for bad credit credit cards
You can get a credit card with bad credit, but these cards may come with an annual fee, higher interest rates and a lower credit limit.
Keeping a low balance is key to using a credit card when you have bad credit. The high interest rate will not be a problem as long as you pay off your balance each month on time. If you get a credit card with bad credit, you can use it to build your credit over time and apply for better cards with more appealing terms and rates.
Plenty of issuers offer credit cards for people with bad credit. Some of the top ones include the Mission Lane Visa® Credit Card and the Credit One Bank® Platinum Visa® for Rebuilding Credit. You can apply for a credit card with bad credit online or over the phone by inputting your personal details, income, Social Security number and other relevant information.
3. Apply for secured credit cards
Secured credit cards for bad credit are available, but you usually have to pay a refundable deposit equal to the desired credit limit. Secured credit card limits are typically lower than average – no more than $500. Once you put down the deposit, you use the card as a normal credit card, making payments each month.
Once you show that you are a responsible credit card user and your credit score improves, you can upgrade or switch the card to an unsecured credit card and get your deposit back.
4. Improve your credit score
The best thing to do to improve your credit score is to pay all of your bills on time and as agreed. You can also use products like Experian Boost, which adds points for utility and phone payments; UltraFICO, which counts your banking history; or a rent reporting service.
If you get a card that offers free credit monitoring, be sure to take advantage of that service. It keeps track of your score and knows where you are. If there are errors on your credit reports, clean them up. If you have outstanding debts, work on getting them paid down or off. Also, be careful about applying for too much credit at one time as too many inquiries can bring your score down.
How to check what credit cards you qualify for
Check prequalified offers
One way to find the right card is to take advantage of prequalified or prescreened offers from an issuer. Check the lender’s website to see if they offer prequalification. Prequalification is not a guarantee, but is useful.
If you find yourself asking “What credit cards do I qualify for?” You can always check prequalified offers with the following credit card issuers:
CardMatch is a useful tool that works much like prequalification. It’s a free service that looks at your credit profile and “matches” you to the best offers available to you based on your personal information. Your acceptance is not guaranteed, but your credit score will only be impacted if and when you apply for the card.
CardMatch is especially useful for comparing card terms side-by-side, since you will get several options to choose from to help you make your decision. Because this service only uses a soft credit pull to check your credit, your score will not be affected in any way during this process.
Use soft-pull credit card applications
Most preapprovals and CardMatch options use soft pulls for you to see what credit cards you qualify for. Soft credit pulls and hard credit pulls differ in that soft pulls give issuers just a quick look at your credit while hard pulls are a full report.
A hard credit pull has a small impact on your credit profile. But if your credit is bad or you have a limited credit history, the initial hit may be harder and it may take longer to recover. This is why it is a good idea to use soft pulls while you are shopping for the best credit card for bad credit, since these inquiries will not hurt your score.
There are credit cards available for any credit score tier, including credit cards for bad credit and secured credit cards for bad credit. If you get a credit card with bad credit, be sure to use it wisely to help improve your credit score instead of further worsening your financial situation. Always pay the balance on time, don’t use more than 30% of your available credit limit and practice responsible habits to qualify for better credit cards in your financial future.