- 1 How to determine whether you need a credit card if you have bad credit
- 2 How to use a credit card to improve your credit score
- 3 How can I improve my credit score?
- 4 The Best Credit Cards for People with Bad Credit
- 5 Top credit cards for those with poor credit
How to determine whether you need a credit card if you have bad credit
Unlike bad credit credit cards, regular credit card applications request the card issuer to lend you money without repayment assurance (apart from your pledge to do so). No security supports the transaction, unlike with a mortgage or auto loan. The issuer denies the application because it believes the risk is too significant if the applicant has a low credit score.
However, features on credit cards for negative credit help card issuers approve more applicants by lowering their risk. When applying for credit cards with negative credit, the process is more “forgiving” than applying for standard credit cards. You might be an excellent candidate for credit cards with bad credit if:
You don’t have much credit history if any at all.
“Poor credit” refers to errors like skipping payments or having accounts turned over to collection agencies. However, as they are often viewed as risky consumers, those with a spotty credit history or none can also profit from a credit card for bad credit.
Your credit rating is under 630.
On a scale from 300 to 850, a credit score below 630 is typically regarded as having substandard or weak credit. A credit card made just for people in your situation is one of the best tools for improving your credit if you have a low score.
How to use a credit card to improve your credit score
A bad credit rating is not a death sentence. It’s a place to start. One of the quickest methods to establish credit is through responsible credit card use.
the following advice:
Limit your card usage
Your credit usage, or how much of your available credit, is a significant factor in determining your credit score. A card that is maxed out is a symptom of financial difficulty. So, at all times, keep utilization below 30%. For instance, if your credit limit is $300, you should maintain your balance below $90.
Make timely and complete payments
With any credit card, the best course of action is to make full monthly payments on the entire balance. Since interest rates on credit cards for those with bad credit are often very high, this will ensure that you never pay interest. Pay the minimum amount required by your due date if you cannot make a full payment.
Keep your accounts open if you can.
Your credit score is influenced by the age of your open credit accounts. Therefore, unless there is a clear cause, such as an annual charge on a card you don’t intend to use, don’t close accounts. Check with your issuer to see if they will allow you to keep your current account when it comes time to switch from a protected card to an unsecured one.
How can I improve my credit score?
Building better credit is connected with raising your credit score. There is no quick fix, but you can take steps to turn things around. Start by always making your bill payments on time. Thirty-five percent of your credit score is based on your payment history. Use autopay to stay on track if it’s hard for you to keep track of the due dates.
Additionally, you should do your hardest to maintain your credit utilization percentage under 30%. You may determine this by comparing your credit card balances to your total credit card limit. Lenders use this percentage to assess your financial management skills.
Generally, a ratio of less than 30% to more than 0% is considered favorable.
Your credit score may also suffer if you apply for too many new credit lines. The lender will perform a hard credit check each time you apply for credit. If accepted, this could lower your average account age, which could lower your credit score by one to five points. If possible, try to refrain from applying for too many credit lines while trying to raise your rating.
The Best Credit Cards for People with Bad Credit
Obtaining a credit card can be a chance to boost your credit score if you have a poor credit history. What to look for in a card for bad credit is listed below:
Can you upgrade?
Some secured cards allow you to “upgrade” to an unsecured card after a certain period of on-time payments. You won’t need to open another account once your credit has improved, which can be advantageous. Your credit score may suffer if you open and close new credit lines, undoing some of your previous efforts.
Most credit cards for those with bad credit have crippling fees, such as exorbitant annual fees that can reduce your credit limit, account opening fees, or even penalties for asking for a higher credit limit. Choose a credit card that aims to reduce your out-of-pocket expenses, even merely by possessing it.
Reporting timely payment activity.
A card that reports to at least one of the three leading credit agencies, Equifax, Experian, and TransUnion, is what you should pick. Consistent payments will eventually appear on your credit report and can help you build credit. Selecting a card that submits credit information to all three credit bureaus is even better.
Top credit cards for those with poor credit
DCU Visa® Platinum Secured Credit Card
Best for: Low interest and fees
The DCU Visa® Platinum Secured Credit Card offers a lower interest rate than many unsecured cards for people with good credit despite being a secured card for people with bad credit. To obtain this card, you must be a Digital Federal Credit Union member, though you can do so for as low as $10 by joining a partner organization.
Grow Credit Mastercard
Best for Security Deposit, Annual Fee, No Credit Check, and Annual Fee
A security deposit or credit check is unnecessary for the Grow Credit Mastercard. You may build your credit history without paying any interest or other costs by paying for eligible subscriptions like Netflix or Spotify. Because you cannot use the card to carry debt, there is no APR.
Capital One Quicksilver Secured Cash Rewards Credit Card
Best for: Upgradability and rewards
The Capital One Quicksilver Secured Cash Rewards Credit Card offers an astonishing array of advantages for people with bad credit. You must make a deposit, but you receive a Capital One card with no annual cost, automatic credit limit reviews after six months, and perhaps even a path to an unsecured Capital One card.
Oh, and you get 5% back on lodging and auto rentals booked through Capital One Travel, plus 1% back on all other purchases, comparable to the rewards offered by many unsecured credit cards.
Discover it® Secured Credit Card.
Best for: Upgradability and rewards
The Discover it® Secured Credit Card requires a cash security deposit, just like other secured credit cards for those who are establishing or reestablishing credit. It offers prizes, unlike the majority of others. But its upgrade options are what set it apart from the competition. A method is in place at the issuer to automatically examine accounts for potential conversion to unsecured cards.