FAQs on credit cards for bad credit
What are good credit cards for bad credit?
Good credit cards for bad credit may sound like an oxymoron, but they are a thing. There are two main types: credit cards that are easy to qualify for with bad credit and cards that help improve your credit score. Although there is a lot of overlap, not all cards available to people with bad credit will help improve your score. Check out the list above to find full reviews of various cards so you can make an informed decision.
How do credit cards help rebuild your credit?
The harsh reality is that credit card companies consider customers with bad credit as a liability. Being so, they either deny them credit or charge higher interest rates and annual fees to offset the risk. The good news is you can work your way out of bad credit.
Credit card companies report your payment history and credit usage to the credit bureaus: the companies in charge of keeping the credit file on which your credit score is based. Your payment history accounts for 35% of your score calculation, and how much you owe in relation to available credit contributes 30% to your score's calculation. So managing your credit line well and paying it on time will help you on the path to rebuilding.
Super Tip: Unless it's a real emergency and only as a slightly better alternative to getting a payday loan or selling your kidneys on the black market, don't keep a balance above 30% of your credit line on your credit card.
What are the things to look for when choosing a credit card for bad credit?
If your credit score is not great, you won't be able to be too picky when it comes to applying for credit cards. That doesn't mean you should apply for just any old card either.
When looking for the best credit card for your financial circumstances, consider the following:
- APR: This is the annualized interest rate you will pay on your credit card balance. Try to find the lowest APR you can qualify for. Note, the APR is not so important when you are not planning to carry a balance.
- Annual Fees: Spoiler alert, credit card companies are only in business to make money. Annual fees help increase the profitability of credit cards by covering the administrative costs of managing a credit card. Look for a card with a low or no annual fee.
- Line of credit: Because consumers with bad credit are a higher risk to lenders, credit card companies tend to offer lower lines of credit. Credit cards that accept applicants with low credit scores and have decent lines of credit are rare. Look for the highest credit line you can get.
- Deposit amounts: Some cards will require you to make a deposit to secure the credit line. Look for cards without a deposit first to see if you can qualify for any. However, be sure to compare other factors such as the fees and APR before jumping on an unsecured offer.
In addition to these factors, look for other rewards and benefits that will help you reap more from the card. While credit cards for bad credit typically have fewer perks, they do exist.
How do I apply for a credit card with bad credit?
As mentioned above, qualifying for a credit card is easier said than done when you have bad credit. Here is a step-by-step guide on how to apply:
- Find out what your credit score is. There are many credit monitoring tools available to help you check your credit score. Ensure you don't have any errors in your credit reports before applying, so your score will be as high as possible.
- Use a credit card database that allows you to filter credit cards by credit score requirements. We may be a little biased, but we feel SuperMoney's Credit Score search engine is one of the best in the business. It's completely free and allows you to filter cards by credit score, fees, rewards, and interest rates.
- Prequalify. Once you find cards that look like good fits, and also have competitive rates and terms, get prequalified to see if they will be an option for you.
- Compare. Hopefully, you prequalify for a few cards. If you do, compare the offers to find the best one. If you only get approved for one, decide if it will be a worthwhile investment.
Super tip: Start with a secured credit card. If your credit score is really in the dumps, you may need to get a secured credit card first. Secured credit cards are not technically credit cards. They are debit cards that base your line of credit on how much you give as a security deposit. In effect, you are paying interest to lend yourself money. The good news is that many banks and credit card issuers will upgrade you to a regular credit card once you can show a pattern of responsible card use for six months.
Important Disclaimer: Credit score is not the only factor credit card companies consider when approving or denying applications. The credit scores used in this article are only guidelines. Your application may be accepted or denied regardless of whether you meet the credit score requirements mentioned.
Can you be denied a secured credit card?
Yes, you can be denied for a secured credit card, but it's typically avoidable by applying for the right card(s). Secured credit cards are much easier to get than unsecured cards because they require a refundable deposit that also serves as your credit limit.
Should you use a credit card as your emergency fund?
While a credit card can be used as an emergency fund, it's best to save up money for emergencies that can earn interest until it is needed. Then, you can use your credit card for planned purchases that you can pay off without being charged interest. Further, you can be sure to keep your debt utilization on your credit card below 30%.
Are there any guaranteed approval credit cards for bad credit?
Guaranteed approval credit cards don't exist. Some lenders may offer almost guaranteed approval, but even secured credit card lenders will run a credit check before approving you. However, in most cases, you can apply for prequalification without hurting your credit score. This process involves a soft credit check so you can find out if you are likely to be approved. The prequalification process can also reveal what credit line and APR you qualify for.
What are some credit cards for a 600 credit score?
The best credit cards for a 600 credit score (or lower) are typically secured cards because they have lower annual fees and are easier to qualify for than unsecured credit cards for bad credit. Of course, secured credit cards do require a security deposit, and the card's credit limit is equal to the amount of the deposit. So, you need to have some money saved for this option to work. Remember the deposit is refundable when you close your account with a $0 balance.
If you're not sure which secured credit card to choose, check the highest-rated secured card in the list above or use SuperMoney's credit card database to compare the rates and terms of dozens of secured cards.
How do I raise my credit score using a credit card?
You can improve your credit score if you get a credit card that reports to the three credit bureaus and use it responsibly. Responsible use includes making at least your minimum payments on time and maintaining a balance of 30% of your credit line or less. For example, if your credit line is $200, you will want to keep your balance at or below $60. This demonstrates responsible management of your available credit. Then, keep the card open and continue to use it in this way over time.
What do I need to apply for a credit card for bad credit?
When you apply for a credit card, you will usually need to provide your:
- Social security number
- Citizenship status
- Contact details
- Employment status
- Annual income
- Monthly housing costs
- Bank account details
Note, a credit card company may ask for proof of income via tax returns, pay stubs, etc. in some cases.
Can you get a credit card with no bank account?
Most credit cards require you to have a bank account. Prepaid cards don't require one, but they also don't report to the credit bureaus, which means they won't help your credit. If you have bad credit, your options are likely already pretty slim, so it may be worth it to consider opening a checking account.
Super tip: Capital One offers a 360 online bank account with minimal fees and flexible approval requirements that you can open from the comfort of home.
Can you get a credit card after bankruptcy?
Getting a credit card after bankruptcy is not out of the question. The best way to find out if it's an option for you is to shop around for cards that fit your credit and financial profiles and see if you prequalify for any of them.
How are secured and unsecured credit cards different?
Secured credit cards require a deposit upfront. In most cases, the deposit amount becomes the amount of your credit line. If you default, the credit card issuer can use your deposit to cover your outstanding balance. This reduces the risk for the lender and enables them to accept borrowers with less-than-perfect credit. Unsecured credit cards don't require any deposit, which means more risk for the lender and stricter qualification requirements.
Can you do a balance transfer with bad credit?
There are credit cards for bad credit that allow for balance transfers. However, most of them will require a security deposit. For example, the Secured Mastercard® from Capital One® allows balance transfers and doesn't charge any fee. Additionally, the Discover it® Secured allows for balance transfers but charges 5% of each transfer.
Keep in mind that with secured cards you will have to deposit the amount you want to transfer first– which may defeat the purpose. However, both of these cards and some others have options to increase your credit line without an additional deposit down the road.
How do I fix bad credit?
Improving a bad credit score requires cleaning up negative marks on your credit report and building positive ones. This can involve paying off old debts, settling them with your creditors, removing erroneous information, and waiting for bad marks to drop off. It can also involve opening new credit lines, paying them on time, and managing them responsibly.
How long does it take to rebuild credit?
Rebuilding credit can begin to happen rather quickly, within a few months, but can take time to get to the level of "good" or better. It all depends on your credit past.
Negative marks stay on your credit report from seven to 10 years. However, as time goes on and you build positive credit lines, the negative marks will lose their weight. Then, eventually, they will fall off.
Your best bet is to settle any past debts that you can and focus on managing your current and future credit as well as possible.
Can I use a store or gas credit card to repair my bad credit?
Store and gas credit cards are rarely a good deal, but they do have a place in the toolbox of consumers with bad credit. On the one hand, they are easier to qualify for than regular unsecured cards and don't require a deposit. On the other hand, they generally have low credit limits, and they're not always accepted outside the establishment that issues them.
Except for those that require a good-to-excellent credit score, which is not an option for those with bad credit, the rewards they offer are not competitive and are restricted to purchases made at their stores. What's more, not all of them report your account and payment history to the credit bureaus, which negates any credit repair benefit they may have.
What do I do if my application is denied?
If your application is denied, you may want to analyze your current credit and financial situation to ensure you applied for the right card(s). If you apply for a card that's not a card for bad credit, you may be shooting yourself in the foot.
However, if you are denied for a card that is seemingly a good fit, you may have some work to do. You will receive an adverse action notice that explains why you were denied. You can then take action to work on improving your finances so you can get approved in the future.