A credit card can be a solid financial tool, allowing you to even out your cash flow, build your credit history, and even provide valuable rewards like cash back. However, getting a credit card isn’t always straightforward — especially if you’ve made financial mistakes or you don’t even have a credit history. It may be difficult to get multiple card offers.
No matter your credit situation, you can most likely can get a credit card. Here’s what you need to know.
What Is Bad or Poor Credit?
“A creditor considers a client ‘bad’ when they assume they’re a high-risk individual,” says Nathalie Noisette, founder of CreditConversion, a company that provides credit education resources and consulting. “The risk is determined by [your] credit score and items listed in their credit reports.”
FICO is the most common credit-scoring model in the U.S. In general, a FICO score of 620 to 670 is considered fair; anything below a 620 is considered poor. If your credit score is below 600, you might have trouble getting a number of credit cards. If you don’t know your credit score, you can perform a credit check.
However, it’s not just items like missed payments and past problems with debt that can keep your score low, causing you to appear risky. In some cases, you might have a “thin” file — not enough information to offer a good idea of what a credit card issuer can expect in terms of your behavior.
“Many people make the mistake of applying for a major credit card straight out of the gate,” says Todd Christensen, an accredited financial counselor with the nonprofit debt relief service MoneyFit.org.
“You generally need to start with something else [like an auto loan] and build a history before you can get the cards considered the best.”
Credit Cards for Bad Credit
Consider a Secured Credit Card
Noisette and Christensen point out that a secured credit card is the best place to start if you’ve made credit mistakes, such as repeatedly missing monthly payments, that contribute greatly to your low credit score.
Unlike an unsecured card, you might need to provide a cash deposit to qualify for a secured credit card.
“Some issuers might require you to match the credit limit,” Noisette says. “So if you have $300, for instance, you’d get a credit card line of that amount.”
Not all secured cards are like that, though. For example, Capital One has a Secured Mastercard that allows a credit line of up to $200. This Mastercard also requires a minimum security deposit of $49.
The card issuer usually refunds your security deposit once the you pay in full and close the credit card account. It might also be refunded if the credit card issuer converts your account to an unsecured credit card once you have a track record of making on-time payments and your credit score improves.
As with any credit card, you’ll be charged interest with a secured credit card and you might be required to pay other fees or an additional deposit. Christensen recommends looking for a secured card that doesn’t charge an annual fee. One example of a secured card is the Green Dot primor Secured Visa Classic Card that offers credit limits from $200-$5,000. Another good example is the Open Sky Secured Credit Card where you can get a variable rate. Finally, Discover has the Discover it® Secured card that offers 2% back for gas and restaurants, as well as 1% back on all other purchases.
Another thing to watch with secured credit cards: failing to make a payment on your due date.
“If you miss a payment, the issuer will suspend the card, take fees from your savings fund, and require you to replenish the savings fund in order to reactivate the card,” Christensen says.
Unsecured Credit Cards for Bad Credit
When you have a “thin” credit file or your score is above 600, you might be approved for an unsecured credit card. Here are two possible options:
- Retail store cards: Christensen says these cards often have lower credit standards and, therefore, are easier to get. However, they often can be used only at their respective stores, and they often come with much higher interest rates or APRs than what you’d get with major credit cards. Pay off your balance in full each month and you won’t be swamped by interest charges.
- Student credit cards: For younger consumers who are in college or have just graduated and have no credit, a student credit card can be a good option. The rewards probably won’t be as good as what you’d see with a standard credit card, but a student card can help you build a credit history with the three major credit bureaus (TransUnion, Experian and Equifax). As long as you make on-time payments and keep your balances low, you should be able to build a history that qualifies you for a better card down the road.
Noisette also suggests trying to get a credit card from a local credit union.
“Let them know you don’t have the best credit score and you’re trying to change that,” she says. “See what options they have for you.”
One example of an unsecured card for lower credit types is the Credit One Bank® Platinum Visa® for Rebuilding Credit that allows you to earn cash back rewards with 1% cash back on eligible purchases
While it’s possible to get a credit card if you have bad credit, be prepared to jump through some extra hoops. You might need to provide a cash deposit to get a prepaid card, or you might have to accept an annual fee, or a higher APR. However, once you adopt good credit habits with responsible use of the card, you will begin to build credit and see your credit score improve — and you should be able to qualify for a card with a lower APR and a higher credit limit. And remember, paying your monthly payments on time is the best course of action for credit building. It will lead to increasing your line of credit, eventually allowing you to be approved for the best credit cards down the line. Responsible card use is always the key to getting that credit card of your dreams.