Credit Cards for Bad Credit

By: John Kiernan, Credit Card Editor

You can find out in two minutes by signing up for a free WalletHub account. You’ll get daily updates to your credit score and report as well as customized credit-improvement advice and card suggestions. There’s also a qualitative test: If any of the following are applicable, you have bad credit: Alternatively, if any of these are applicable, you have bad credit:

• You are late on a credit card, loan or medical bill or payment
• The balances on your credit cards are near your limits
• You have declared bankruptcy in the last three years
• You have been more than 60 days late on a medical bill, credit card or loan payment in the last nine months.

By: John Kiernan, Credit Card Editor

Simply put, get a credit card for bad credit and use it responsibly. To improve bad credit, you need to add positive information to your credit report on a regular basis, so as to basically bury negative records from the past. And a credit card for bad credit is the best tool for the job.

You should be able to get approved for one, to start with. And it doesn’t have to cost you a thing. There are a handful of credit cards for people with bad credit that don’t charge annual fees. And you can build credit without actually making any purchases, if you’re worried about overspending.

Most importantly, all credit cards relay account information to the major credit bureaus each month. And this information will benefit your credit score as long as it reflects on-time payments and low credit utilization.

If you want to take your credit-building efforts to the next level, consider becoming an authorized user on a family member’s credit card account. This will give your credit reports an extra helping of positive information each month, assuming the family member in question has good or excellent credit.

By: John Kiernan, Credit Card Editor

There is no secret for how to get a credit card with bad credit, other than choosing the right kind of card. There are two types of credit cards that you can get with a poor credit score: secured credit cards and unsecured credit cards for people with bad credit. Both types report account information to the major credit bureaus each month, which means either can help you rebuild your credit if used responsibly. But they’re far from equal in terms of accessibility and cost. Secured cards are the easiest credit cards for anyone to get, offering nearly guaranteed approval even to people with very bad credit. Some don’t even check applicants’ credit history, which means there’s no hard pull to hurt your score more. Secured cards also charge much lower fees than unsecured cards for bad credit.

All of that, from the high approval odds to the low fees, is thanks to the fact that you have to place a refundable security deposit to get a secured credit card. The amount of this deposit, which you typically have to place when you apply, usually serves as your spending limit. This prevents you from spending more than the card’s issuer knows for sure you can afford to repay. And without the risk of being left with an unpaid balance, the issuer can afford to approve more people as well as offer more attractive terms.

Now that you know the lay of the land, the path to plastic despite poor credit should be clear. But for your convenience, we’ll lay out step-by-step instructions below.

Here’s how to get a credit card with bad credit:

1. Compare secured credit card offers. Shopping around will help you find the card with the lowest fees, lowest deposit requirement and highest approval odds.
2. Fill out an application. Applying online is best because you get a decision soonest.
    
3. Place your security deposit. You’ll have to submit your deposit either when you apply or after approval but before opening an account. You can usually fund the deposit with a transfer from a bank account or prepaid card. The funds will be returned if you don’t get approved or when you close your account (minus any unpaid balance).
4. Get approved. It’s possible to get rejected for a secured credit card, but not likely.

Getting a credit card with bad credit can be tricky. But it’s crucial to open an account as soon as possible in order to begin repairing your credit reputation. A secured card allows you to do that. And it has the added benefit of helping you avoid being rejected repeatedly, which would only make matters worse.

When it comes to specific cards to consider, the Capital One® Secured Mastercard® and Discover it® Secured Card are two of the best options available. And they’re generally available to people with bad credit who don’t have a non-discharged bankruptcy on their credit report. Alternatively, the OpenSky, primor Gold and primor Classic secured cards won’t check your credit when you apply.

No matter which secured card you choose, paying your bill on time every month will add positive information to your credit reports, which will help cover up past mistakes. But sometimes that’s not enough. Some people with bad credit need a credit card with no security deposit to cover emergency expenses. In that case, an unsecured credit card for bad credit is your only option.

You won’t have much of a selection when shopping for an unsecured card with bad credit, unfortunately. You won’t get too much extra spending power, either, because high fees will initially consume much of your credit line. But it’s definitely possible to get approved for such a card. Just compare your options and double-check the eligibility requirements in their terms and conditions to make sure nothing in your background rules you out.

So, to recap, a secured credit card is your best bet if getting approved and beginning to rebuild your credit as soon as possible is your top priority. But if you need an emergency loan, you’ll have to make do with a costly unsecured card for bad credit.

By: John Kiernan, Credit Card Editor

There are two main types of credit cards with bad credit: secured credit cards and unsecured credit cards for bad credit.

Secured credit cards require a refundable security deposit that doubles as your credit line and prevents overspending. As a result, issuers can afford to charge fairly low fees and interest rates on secured credit cards. In contrast, unsecured credit cards for people with bad credit provide a small amount of spending power that you don’t have to prepay. But they offset the risk of not being paid back by charging very high rates and fees.

Here’s a quick snapshot of how the two types of credit cards for bad credit compare, based on the latest information from WalletHub’s database of 1,000+ offers:
 

 

Finally, it’s worth noting that a third option sometimes exists for people with poor credit: partially secured credit cards. Such cards are a hybrid of sorts, combining features from secured and unsecured offers. Basically, they require a security deposit but may give you a credit line in excess of the amount you put down. Partially secured cards tend to be a bit harder to get than fully secured cards.

By: John Kiernan, Credit Card Editor

How long it takes you to recover from bad credit depends on a number of factors, including the length of your credit history, the reason(s) your credit is damaged, and whether negative information is still being added to your credit reports. Everyone’s credit situation is different, after all. Some people have bad credit because of bankruptcy and foreclosure. Others may have simply missed a few minimum credit card payments. Some don’t make the same mistake twice. Others find themselves regularly taking two steps back for every stride forward.

With that being said, your credit is unlikely to recover fully until the most serious negative records fall off your credit report. That’s seven years in most cases but 10 years for bankruptcy. But you won’t be stuck with bad credit that whole time. You should see improvement in your credit score within about 18 months of your last derogatory mark, assuming new negative information isn’t added to your credit report in the meantime. You’ll also need at least one credit card in good standing for such results.

For more information, check out WalletHub’s articles on How to Rebuild Credit and How to Build Credit Fast.

By: John Kiernan, Credit Card Editor

A secured credit card is the best type of credit card for people with bad credit. It works just like any other credit card, except for the fact that you are required to place a refundable security deposit. And the amount of this security deposit usually acts as your spending limit.

You might think that’s a bad thing, but a secured card’s deposit actually has some very important benefits. By preventing cardholders from spending more than they can afford, secured cards protect issuers against losses, which allows them to charge lower fees and approve more applicants.

Secured cards also report to the credit bureaus on a monthly basis, just like any other credit card. And you can’t even tell them apart from unsecured cards on a credit report. So as long as you always pay your bill on time and avoid maxing out your spending limit, a secured card will steadily help your credit score improve.