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Author: Barry Bridges | bbridges@bankrate.com
The information about the Capital One Cards has been collected independently by Bankrate.com. The card details have not been reviewed or approved by the card issuer.
Everything you need to know about credit cards for bad credit
Credit cards designed for those with bad credit often come with different fees and requirements than cards that are created for those with good credit. The key is to choose one that best fits your current situation, as well as your future plans. In this article, our experts dive into the impact of bad credit, how you can improve your credit score, and Bankrate’s take on some of the best cards on the market today.
Compare Bankrate’s best cards for bad credit
A closer look at top credit cards for bad/poor credit
OpenSky® Secured Visa® Credit Card
Why we rate it best for credit educational support
If you have zero credit history or just very little, the OpenSky Secured Visa Credit Card doesn’t care. In fact, they won’t do a credit check at all or even require you to have a checking account. This makes it one of the few cards to basically grant access to anyone who is willing to fork over a deposit. This can be a lifeline for someone in a credit jam who is trying to get a card.
Card Details:
- Issuer: OpenSky
- Card Type: Secured card for bad credit
- Best For: Credit educational support
- Bankrate Score: 3.4/5
- Annual Fee: $35
- APR: Variable 17.39%
Capital One® Secured Mastercard® (not currently available)
Why we rate it best for rebuilding credit
The Capital One Secured Mastercard is one of the only secured cards with a deposit requirement that could be lower than your limit. This card also comes with an option to pay the opening deposit in installments over an 35-day period.
Card Details:
- Issuer: Capital One
- Card Type: Secured card for bad credit
- Best For: Rebuilding credit
- Bankrate Score: 4.2/5
- Annual Fee: $0
- APR: Variable 26.99%
Discover it® Secured (not currently available)
Why we rate it the best secured card with rewards
If you don’t have a robust credit history, finding a card that offers a substantial rewards program can be difficult. With the Discover it® Secured card, you’ll earn 2 percent cash back at gas stations and restaurants on up to $1,000 in purchases each quarter. Plus, you’ll earn 1 percent cash back on all other purchases, and Discover will match all of the cash back that you earned at the end of your first year — automatically.
Card Details:
- Issuer: Discover
- Card Type: Secured card for bad credit
- Best For: Secured card with rewards
- Bankrate Score: 4.8/5
The information about the Discover it Secured has been collected independently by Bankrate.com. The card details have not been reviewed or approved by the card issuer.
Total Visa® Unsecured Credit Card (not currently available)
Why we rate it the best unsecured credit card for rebuilding bad credit
If fast approval is the most important factor in selecting an unsecured card, then the Total Visa Unsecured Credit Card delivers. It clearly states on the card application page that even those with less-than-stellar credit are likely to get approved.
Card Details:
- Issuer: Visa
- Card Type: Unsecured card for bad credit
- Best For: Unsecured card for rebuilding bad credit
- Bankrate Score: 2.8/5
- Annual Fee: See terms
- APR: See rates and fees
What is considered a bad credit score?
Bad credit is typically defined as a credit score lower than 549. Major credit bureaus determine your credit score by measuring your ability to keep up with credit agreements such as credit card bills, loans, and utility bills.
A few different factors determine your credit score, such as:
- The amount you owe to creditors
- The length of your credit history
- Mix of credit (loans vs. cards vs. bills)
- New credit inquiries
- Available credit
- Credit utilization (how much of your available credit you’re using – the lower, the better)
- Timeliness of payments
It’s important to keep in mind that credit scores are flexible and can change often depending on your individual credit activity.
How to build your credit score with a credit card
With time and smart decisions, you can improve your credit score and create a healthy financial environment.
Start by following these five tips for improving your bad credit score:
- Check your credit report. Obtain your credit report and check it thoroughly for any errors. If you see any, be sure to submit a dispute.
- Clear debts. Catalog all of your debts and create a plan of attack to clear them. Prioritize your debts and stick to a payment schedule to pay everything down. Of course, this is easier said than done, but managing debt is a big step forward in improving your score.
- Spend smart. Ensure you’re making all of your payments on time and in full. Try to keep your balances low, and do your best not to spend beyond your means.
- Stick to a plan. Although you can quickly find yourself with a low score, building a positive score takes time. Stick to your financial plan, and don’t start aggressively opening and closing accounts unless it makes sense.
- Keep climbing. Length of credit history plays into your score, but recent activity also carries weight. Your continued good credit behavior can help offset historical mistakes.
The difference between secured and unsecured credit cards
Secured credit cards require an initial deposit, which serves as a layer of protection for the card issuer in case you miss payments. The deposit you make often becomes your credit limit. But you may receive a credit line that is greater than the initial deposit. A secured credit card otherwise operates in a way that is similar to a regular, unsecured credit card. You’ll be able to purchase items with the card and then make payments. Interest is charged on balances carried month-to-month. If you’re curious to learn more about these options, check out our picks for the best secured credit cards in the market today.
Bankrate’s favorite secured cards
- Capital One Secured Mastercard (not currently available)
- Discover it Secured (not currently available)
Unlike secured credit cards, unsecured credit cards don’t require a deposit. They allow you to buy items, charge them to the account, and then pay off the balance. However, unsecured credit cards for bad credit tend to include additional fees and higher-than-average interest rates.
Bankrate’s favorite unsecured credit cards
- Credit One Bank Visa Credit Card
- Total Visa Unsecured Credit Card (not currently available)
Helpful tips before you apply for a new credit card
Even if you have bad credit, credit cards aren’t necessarily off-limits. Consider these five tips for finding a card that fits your needs.
- Do your research. Be thorough in your research before applying and ensure it’s the right card for your needs. Look closely at any fees and interest rates.
- Check the fine print. Some credit cards for bad credit offer rewards programs such as cash back. But be wary of luxury cards. Although the benefits may be attractive, these cards often come with annual fees and high rates. Don’t apply for cards that you’re unlikely to qualify for, as this will hurt your score further. If you’re unsure of your credit score, check it for free at myBankrate.com
- Transfer a balance. If you’re looking to transfer debt, consider balance transfer cards that allow you to put a balance on the card for an extended period of time for a low or zero interest rate.
- Keep balances low. Other than a balance transfer card, try to avoid putting large balances on a new credit card. Take a look at your credit limit, and try to keep balances low to lower your credit utilization.
- Try secured cards. If you’re finding it difficult to find a card that you qualify for, take a look at secured cards. These cards require a deposit up front, but with your help (on-time payments, keeping a low debt-to-credit ratio), these cards could help you build your credit score.
Frequently asked questions about credit cards for bad credit
Can you get a credit card after bankruptcy?
Extreme financial distress, like bankruptcy, can seem like an impossible situation to recover from. The good news is that depending on your situation, you still may be able to qualify for a credit card after filing your bankruptcy. While applying for a credit card may seem counterproductive, a credit card can be a great tool to help you financially recover when you use it correctly.
Even though it may be difficult to find a card that you can get approved for, a secured credit card may be your best bet at strengthening your creditworthiness. In order to make the most of your credit card after bankruptcy, it’s important to avoid the financial mistakes that were made in the past. Paying your bills on time, not allowing a balance to accumulate and using your card only for things that you can afford at the time can be key in improving your overall financial health.
Can you do a balance transfer with bad credit?
When credit card debt piles up, the smartest thing to do is pay it off as quickly as possible. If you have bad credit and you’re considering a balance transfer, there are options available that can help you tackle that looming debt. Thankfully, there are balance transfer credit cards that you may be able to qualify for with bad or poor credit. While this could be the tool you need to pay off some of that debt, keep in mind that you may not receive an interest-free window, so you’ll need to be diligent in paying your balance off in full each month.
Can you get blacklisted by a credit card company?
Simply put, no, you cannot get blacklisted by a credit card company. Your creditworthiness and personal credit history will affect whether you get approved or denied, not a credit card blacklist.
If you keep getting denied, conducting a personal audit of your credit may be a good idea. Here are some things to look for:
- Do you have any outstanding balances?
- Do you have a history of skipping payments?
- How much credit card debt have you racked up over the years?
The answers to these questions could provide an answer as to why you’re not getting approved.
How do you choose a card that’s in your credit range?
When you apply for a new card, make sure it’s within your credit range so that you don’t run the risk of having your application denied. Here are three important tips:
Look for a recommended credit score
Whether you’re comparing offers online or looking at an offer you received in the mail, always keep an eye out for each card’s recommended credit score. If you don’t see it in the marketing details, look for a toll-free number to call so you can ask a customer service representative.
Look for pre-qualified offers
With a pre-qualified offer, you can get a better idea of whether you might be approved without having the issuer run a hard credit check that will temporarily lower your credit score.
Steer clear of deluxe credit cards
Although there are some exceptions, most of the top-tier credit cards will require good credit or better. For example, someone with bad credit will usually have trouble qualifying for a luxury travel card.
How we chose our list of top cards for bad credit
Using Bankrate’s scoring methodology our experts assess a ton of factors such as annual fees, APR rates, introductory bonuses, balance transfers, rewards value and how easy rewards are to redeem, travel perks, and any extras and discounts. If you have a bad or poor credit score we have focused on the attributes you might be most concerned about when selecting a new credit card.
Annual fee
Getting charged a fee every year for being a cardholder can eat into the value you’re getting from your card. We make sure that the perks and rewards of the card make up for the annual fee and identify how much you need to use your card to make the annual fee worth the expense.
0% Introductory APR offer
The annual percentage rate is the rate of interest you’ll have to pay on your outstanding balance so the longer the period without APR, the better. We make sure you’re getting the best deal.
Balance transfer offer
When you move part or all of the outstanding balance you owe from one lender to another, this is called a balance transfer. Some cards offer a low fee on transferred balances — usually around 3%-5% of the transferred amount. Transferring a balance can be a tool to consolidate debt, pay down what you owe at a lower rate, and improve your credit score.
Rewards
Even if your credit score isn’t perfect there are cards that offer fantastic rewards that help you earn cash back, points, or miles on what you’re spending every day. We evaluate the rewards and identify which card is a good fit for different types of spenders.
Additional research to help you improve your credit score
Check out these informative Bankrate resources, plus in-depth reviews of credit cards designed for people with bad credit:
Senior Editor Barry Bridges has been writing about credit cards, loans, mortgages and other personal finance products for Bankrate since 2018. His work has also appeared on websites including Nasdaq.com, Zillow.com and The Simple Dollar. He was previously an award-winning newspaper journalist in his native North Carolina. Send your questions about credit cards (and fantasy baseball) to bbridges@bankrate.com.
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