How to Get a Credit Card with Bad Credit

How to Get a Credit Card with Bad Credit |‌‌ ‌Payday‌ ‌Champion‌

You may be surprised to find out that a new credit card can help you if you have “bad” credit. You’ll be able to establish better credit habits and creditworthiness if you are able to apply for a new credit card even if you have poor credit. If you are already in debt, adding a card to your credit can increase your credit utilization ratio as well as your credit score.

Bad credit cards are not widely available and offer very few benefits. Bad credit cards can come with high interest rates and fees, making it difficult to carry a balance.

Despite all this, credit cards with bad credit can be very beneficial. Let’s look at which credit cards are available for people with bad credit and how they can be used to your advantage.

What is “bad” and “poor credit?

You probably know that you have bad credit. Poor credit scores are often a sign that you have been denied credit cards or other loans in your past. You probably also know why you have poor credit, whether it is because you defaulted on a loan or credit card, lost your account, or are a bankrupt.

Even if this is the case, it’s still a good idea to look at your credit score to see where you stand. There are many ways to easily check your credit score.

Sign up for credit monitoring services that offer a free credit score or credit tracking tools. CreditWise by Capital One offers consumers a free view of their VantageScore 3.0 TransUnion report. You don’t even have to be a customer in order to use it.

Your FICO credit score is the most popular scoring model. You will want to pay attention to it as you work on improving your credit score. FICO credit scores can range from 300 to 800 and can be broken down into these tiers:

  • Exceptional: 800 or higher
  • Very Good: 740-799
  • Good: 670-739
  • Fair: 580-669
  • Poor: 579 or lower

FICO scores of 580 and less are considered “poor credit”, but “fair” credit ratings between 580-669 are still lower than the average for US consumers. You should immediately take steps to improve your credit score if it falls into one of these categories.

With bad credit, what type of credit cards are available?

There are two types of credit cards that you can get if you have poor credit: secured credit cards or unsecured credit cards.

If you have poor credit, secured credit cards are the most accessible. Secured credit cards do require cash deposits to be opened. You may need to deposit $200, $500, or more to secure your card. In return, you will typically receive a credit limit equal to or near your deposit.

Secured credit cards have the most significant benefit: they are usually reported to major credit bureaus. All your payments are added to your credit history, which can boost your credit score over time. 

Even though you must make a cash deposit to open a secured credit card, your deposit will be refunded if the account is closed or upgraded with good standing and a $0 balance.

You may be eligible for an unsecured card with poor credit in addition to secured credit cards. Although these cards have a lot of disadvantages, such as high fees and low credit limits, they can still help you build your credit.

Before you apply, ask questions.

You should have a clear understanding of what you want to achieve before applying for a credit card. Although credit cards can improve your credit score, they could also make it worse. Before you apply for a credit card, consider these questions:

  • Will I carry a debt?

     Credit cards with bad credit have high-interest rates. Secured credit cards are not an option for those who need loans. They require that you put down cash collateral.

  • I’m interested in earning rewards 

    Although rewards are attractive, they can also be tempted to spend more than planned.

  • Should I pay an annual fee for credit cards?

     Some credit cards are free, but not all. You should ensure that the benefits you get in return for paying an annual fee are worth it.

  • Is it time to seriously consider my credit?

     You have the opportunity to improve your credit, but it will not happen overnight. A new credit card won’t make your life easier if your balance is low and you pay your bills on time.

You need to be aware of what to do if you have poor credit

Although the best credit cards for people with bad credit might not be appealing, their goal is to improve your credit score to allow you to qualify for better offers. There are some things you need to know and be careful about.

  • Fees

     – While it is essential to avoid annual fees, some credit cards, particularly those with poor credit, may charge an account opening fee or a program fee. These offers should be avoided as much as possible.

  • High APRs

     – Be aware of high-interest rates, which can make it very expensive to carry debt. If you intend to use your credit card to improve your credit, it is best not to accept any balances on the card.

  • Credit mistakes

     – Finally, avoid making mistakes that could damage your credit. Paying your credit card bills late is the worst thing that you can do. This will negatively impact your credit score.

To improve your credit score, get a new credit card

You need to understand the basics of credit scoring to obtain a new credit card that will help you rebuild your credit. Let’s look closer at the five components that make up your FICO credit score.

  • Payment History: 35%
  • The amount due: 30%
  • Credit history length: 15%
  • New Credit: 10%
  • Credit Mix: 10%

It’s easy to identify your next steps when you take a look at all of these factors. You should make every effort to pay your credit card and other bills on time each month. You should also keep your debt low as the amount you owe relative to your credit limit is 30% of your FICO score. This is also known as your “credit utilization ratio.”

Bad credit cards will have a lower credit limit. This means that you need to make sure you don’t exceed your credit limit and pay your balance every month.

You can increase the length of your credit history by keeping older credit accounts open in good standing. Also, you can keep your score high under “new credit” by not opening too many accounts.

The credit mix is the last category you should keep in mind. However, you might not have too many types of credit (e.g., installment loans such as a mortgage or car loan) if your credit score is low or fair. 

After improving your credit score, you can start to think about diversifying your credit by taking out installment loans, revolving credit accounts, and other credit types.

If you want to improve your credit score, it is important to avoid repeating the mistakes that led to the problem. If you decide to apply for a credit card, make sure you are careful about using it. 

Avoid overspending, paying your bills on time, and avoiding cards that have high fees to get you back on track to building good credit.

Is your credit rating outstanding? Maybe you don’t even have credit. Payday Champion has your back with these stories:

  • How can you get the best credit card for good credit
  • How can you get the best credit card for excellent credit
  • How to get credit without credit

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Author: Jay Batson

My Name is Jay has and I have a passion for financial writing. I am the chief writer on this blog. I do my best to verify all the information but if there is anything amiss please let me know and I will do my best to correct it.

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