If you have poor credit but you need a credit card to get back on track, consider these tips before you apply.
Having a credit score in the bad credit range can make life more difficult — and expensive. It can lead to challenges you may not even have thought about, such as having to pay higher interest rates and getting hit with higher insurance premiums. In addition, credit card options for those with poor credit are limited.
That said, there are some strategies you can use to improve your chances of getting a credit card — even if it’s not the one of your dreams. If you have poor credit but you need a credit card to get back on track, consider these tips before you apply.
Check your credit score first
First, make sure you check your credit score to see where you actually stand. After all, it may not be as low as you think, and having a “fair” credit score (FICO score from 580 to 669) can help you qualify for a host of additional cards.
You can also get a free FICO score through Experian.
Compare credit cards geared to your credit rating
Once you know where your credit score falls, you can look for cards you may be able to qualify for. For example, there are cards for those with all types of credit, as well as student credit cards aimed at credit newcomers hoping to build credit while they’re in college.
You can also look at credit cards for people with limited or no credit history, which are often much easier to qualify for.
Consider secured credit cards
If you have really poor credit or no credit at all, you can also consider applying for a secured credit card. This type of card requires you to put down a cash deposit as collateral, but at least you’ll almost always get approved if you apply.
Putting down a cash deposit as collateral may not sound that great, but these cards can help you build credit when others won’t. Not only do most secured credit cards report to the credit bureaus, but some also even offer rewards.
Take the Discover it® Secured Credit Card, for example. It requires a security deposit of at least $200, but it doesn’t charge an annual fee. Cardholders can also earn 2 percent cash back on up to $1,000 they spend at gas stations and restaurants each quarter (then 1 percent back), plus 1 percent back on all other purchases. Discover will also double all the rewards you earn after the first 12 months through its Cashback Match program.
Look at cards that consider alternative data for approvals
Also consider credit cards that use information other than credit scores for approvals, including the Petal® 1 “No Annual Fee” Visa® Credit Card and the Petal® 2 “Cash Back, No Fees” Visa® Credit Card. This card issuer (WebBank) considers data like your banking history to get you approved, so a poor credit score may not hold you back. WebBank even lets you check your approval odds for either card without creating a hard inquiry on your credit report.
Gauge your approval odds online
Speaking of gauging your approval odds, you can see which other cards you could qualify for by using our CardMatch tool. It enables you to enter basic information like your name, address, employment status, annual income and email address to see your pre-qualified card offers.
The best part? The CardMatch tool is completely free to use, and there’s no obligation to apply if you aren’t matched with a card you like.
Take steps to improve your credit before you apply
It can pay off to wait if you don’t need to apply for a credit card right away. You may be able to improve your credit score more than you think over the span of a few months, which could help you get approved for a much broader range of cards.
Steps you can take to improve your credit score include:
- Paying all your bills early or on time, which is important since your payment history makes up 35 percent of your FICO score
- Paying down debt, which can help lower your credit utilization rate — a factor that makes up 30 percent of your FICO score
- Refraining from opening new accounts or closing old accounts if you can
- Using a free credit-building tool like Experian Boost
A low credit score can leave you with limited options when it comes to credit cards, but that doesn’t mean you have no options at all. You can take steps to boost your credit score before you apply, but you can also consider a range of credit cards designed with bad credit borrowers in mind.
Whatever you do, make sure you use your new credit card carefully and wisely. Never pay your bill late and try to keep your utilization below 30 percent of your available credit at all times. With some time and plenty of responsible credit use, you should definitely see your credit score go up.