How to get a credit card with bad credit

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Bad credit can be daunting, especially if you want to make big transactions like leasing a car or buying a house. Some credit cards may be completely barred to you, and you will likely have to pay much higher interest or fees for the credit products you have access to. The good news is that you can improve your creditworthiness over time by following the steps below. Whether your credit problems stem from bad credit habits like not paying your bills on time, losing your job or going bankrupt, or having a poor credit history because you’re young, there is a way to improve your credit. By knowing your credit score and using credit cards that require a deposit, store credit cards, or some traditional credit cards, you should be able to rebuild a favorable credit history.

Who should get a “bad credit” card?

If you’ve been denied credit or told you have bad credit, you still have the option of getting a credit card. The first step is to be certain that you can manage credit card debt. If you rarely pay your bills on time or max out your credit card, you may not be ready to deal with having a credit card.

What is a FICO score?

If you think you’re ready for a credit card, the first step is to check your FICO score. A FICO score (opens in a new tab) measures your creditworthiness on a scale of 300 to 850, where a higher score is preferable. Major banks, credit unions, and credit card companies often provide a free FICO score to their customers. If you can’t find a FICO score, you can access it for free at the credit bureau Experian (opens in a new tab).

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Lenders generally consider a FICO score between 300 and 579 as “bad” (sometimes called “poor”) and between 580 and 669 as “equitable”. The lower the score, the harder it will be to get a credit card. Consumers with lower credit scores will generally need to offer the lender some assurance that they will repay their loan. Borrowers can offer such insurance in three ways: by securing a card with an upfront payment, by accepting a higher interest rate, or by paying a fee.

FICO score values
Bad/Poor Fair Good Very well Excellent
300 – 579 580 – 669 670 – 739 740 – 799 800 – 850

What is a “secured” credit card?

A credit card is “secured” when the borrower makes an initial deposit that the lender typically holds for the duration of the account opening. Deposit amounts can vary, but are generally between $200 and $300. Some cards, called “low deposit credit cards,” start with smaller deposits, such as $49, and help borrowers gradually increase their deposit amount.

The “line of credit,” or the total amount a lender can borrow, can be the same as the deposit amount or a little higher.

A secured credit card is not a quick way to access new credit. Rather, it will help you fix a bad or fair FICO score by showing that you can pay your credit card bill on time. Some cards also offer useful tools for credit repair. And few borrowers are turned down; even if your credit score is very low, if you are young and have no credit history, or if you are coming out of bankruptcy, you can probably get a secured credit card.

Secure cards have some drawbacks. In addition to having to pay an initial deposit, borrowers can also face high interest rates and fees. Few of them will offer rewards like travel points, and those that do offer rewards will likely have high fees.

What is an “unsecured” credit card?

Most credit cards are “unsecured,” meaning they provide access to credit without an initial deposit. If your FICO score is fair, you may qualify for an unsecured credit card designed to help repair credit. But beware; these cards often have high interest rates and fees. If you fail to pay your credit card bill at the end of the month, you could easily fall into a credit card hole, further damaging your credit.

Should you get a retail credit card?

For those with fair credit, store brand credit cards are another option. Major retailers like Costco, Amazon, and Target offer credit cards that offer rewards or discounts for in-store purchases. However, these cards often have high interest rates, so only apply for them if you are sure you can pay off your credit card balance each month.

What is an APR?

When signing up for any type of credit card, pay attention to the card’s fees and annual percentage rate, or APR (opens in a new tab). Even if you mistakenly pay your credit card bill a few days late, a high APR can add hundreds of dollars to next month’s bill.

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