It’s one thing to get a credit card when you have no credit history—but what if the history you do have is, well, not great? Sure, having a low credit score will make obtaining a traditional credit card challenging, but it’s not impossible. Let’s take a look at the options available to help you secure a credit card, even with bad credit.
Consider secured credit cards
Secured credit cards are an excellent starting point for those with poor credit. With a secured card, you place a refundable security deposit, typically $200 or more, that becomes your credit limit. The deposit acts as collateral, reducing the issuer’s risk. Many major banks and credit card companies offer secured cards.
Of course, be sure to make all of your payments on time and keep your balance low. After 12 to 18 months of responsible usage, you can often upgrade to a regular unsecured card and get your initial deposit back.
Look for cards designed for bad credit
Several issuers offer unsecured credit cards specifically designed for people with poor credit. However, do keep in mind that these cards often have higher fees and interest rates, and lower credit limits. Read the terms carefully before applying to understand all associated costs.
Become an authorized user
This strategy involves asking a family member or trusted friend to add you as an authorized user on their credit card account. You’ll receive a card in your name linked to their account, and their positive payment history can help boost your credit score. Ensure the primary cardholder has a good credit history and responsible habits. Not all issuers report authorized user activity to credit bureaus, so check first.
Try store credit cards
Target, Kohl’s, whatever suits your fancy—retail store cards can be easier to qualify for than traditional credit cards. While not ideal in the long run, retail store credit cards can at least help give your score a boost, since they often have more lenient credit requirements. However, it’s crucial to be cautious of high APRs on these bad boys, which can often exceed 25%. Still, their limited use (only at the specific store or chain) can help control spending. Some stores offer instant approval, allowing immediate purchases.
Explore alternative credit cards
Some newer companies offer credit cards based on alternative data, considering factors like income, employment, and bank account history instead of just credit scores. While I don’t have any personal experience with them, examples include the Petal Card and the Tomo Credit Card.
Improve your credit score
While working on getting a credit card, take steps to improve your overall credit health:
Pay all bills on time, every time.
Reduce your credit utilization ratio by paying down existing debts.
Dispute any errors on your credit report.
Avoid applying for too many cards in a short period, as this can further lower your score.
As your credit improves, you’ll qualify for better card offers.
Get a credit-builder loan
With a credit-builder loan, you borrow an amount like $500 or $1,000 and make fixed payments over six to 24 months. The lender deposits the borrowed amount into a locked savings account, and once you’ve completed the loan payments the money is unlocked and given to you. These loans are designed solely for building credit history.
Be cautious of predatory lenders
When desperate for credit, it’s easy to fall prey to predatory lenders. Avoid:
Cards with extremely high fees or interest rates.
Offers that seem too good to be true.
Lenders who use high-pressure tactics or rush you to decide.
Payday loans or cash advance loans, which can trap you in a cycle of debt.
Check for pre-qualification
Many credit card issuers offer pre-qualification tools on their websites. These tools perform a soft credit pull, which doesn’t affect your credit score. Pre-qualification gives you an idea of your approval odds before applying, but it doesn’t guarantee approval.
Remember, the key to rebuilding your credit is using any new credit responsibly. Make payments on time, keep your credit utilization low, and avoid overspending. With patience and good financial habits, you can improve your credit score and qualify for better credit cards in the future. For more, here are some of the best credit cards for people with bad credit.
