Credit cards for a 500 credit score (or less)
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When it comes to building credit, everybody has to start somewhere. A credit score of 500 or less leaves plenty of room for you to grow over time when you work strategically to build or rebuild your credit. If you don’t have the best credit score, that doesn’t count you out for some solid credit cards on the market. Plenty of credit cards for a 500 credit score or lower offer credit-building tools and some may even offer rewards.The cards featured here could get you on the right track for better cards — and better credit — in the future.
Credit cards you can get with a 500 credit score
Capital One Platinum Secured Credit Card: No credit history
The Capital One Platinum Secured is one of the best credit building cards on the market. Though the card doesn’t offer rewards and it’s secured (meaning a security deposit is required), your security deposit could be as low as $49 while still giving you access to at least the minimum credit limit of $200. This card has one of the lowest security deposit requirements on the market and doesn’t charge an annual fee, making it super affordable.
As is customary with many secured cards and other credit cards for bad credit, the ongoing APR for this card is fairly steep at 29.74 percent variable. In this case, carrying a balance is not ideal if you want to avoid hefty interest charges. However, you’ll have the opportunity to increase your credit limit after six months of demonstrating sustained responsible card use and Capital One offers plenty of cards that you can graduate into with a host of lucrative perks and rewards.
Petal 1 “No Annual Fee” Visa: No credit history
If you don’t want to pay a security deposit, the Petal® 1 “No Annual Fee” Visa® Credit Card is an unsecured option that you can get with little to no credit history. The ongoing APR ranges from slightly lower than average for a credit card for limited or bad credit to exorbitant depending on your creditworthiness and market value. Beware of carrying a balance, as those interest charges could come at a variable 23.74 percent to 33.24 percent APR.
The card is fairly affordable in other ways, as there are no annual fees or foreign transaction fees and again, you won’t have to put money down for a security deposit. You can occasionally earn cash back at select merchants via the Petal Perks program, but overall there isn’t much of a rewards structure.
Discover it Secured: No credit history
Having bad credit doesn’t necessarily mean you can’t get a rewards credit card. The Discover it® Secured Credit Card is geared toward people with little or no credit and offers competitive rewards, a stellar intro offer and to top things off, it doesn’t charge an annual fee. The card reports to all three major credit bureaus and you’ll be eligible for a credit line increase after seven months of responsible card use.
You will have to foot the bill for the fairly standard $200 security deposit to get this card. The ongoing APR range is also high, but not the highest around, at 26.74 percent variable. Again, it’s important to avoid carrying a balance, but you do have the chance to offset some of those charges with reward earnings. You’ll get 2 percent cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter, then 1 percent and unlimited 1 percent cash back on all other purchases. Plus, with Discover’s Cashback Match™ program all the rewards you earn will be matched after your first year.
Petal 2 “Cash Back, No Fees” Visa: No credit history
The Petal® 2 “Cash Back, No Fees” Visa® Credit Card is the sister to the Petal 1 card, with a few extra perks involved. The first perk of note is that the Petal 2 has a clearly spelled-out rewards program. However, your rewards come as an incentive for making consistent payments towards your credit card balance. You’ll earn 1 percent back on eligible purchases right away with this card and you have the opportunity to earn up to 1.5 percent cash back on eligible purchases after making 12 on-time monthly payments.
True to its name, this card is fairly affordable since it charges no annual fee, no foreign transaction fees, no late fees and no returned payment fees. The catch is in the ongoing variable APR, which can range from 16.74 percent on the low end to 30.74 percent on the high end. Your ongoing APR is based on your creditworthiness, so if your credit isn’t the best it could prove expensive to carry a balance.
Credit cards for under a 500 credit score
Mission Lane Visa: Bad to fair (300-670)
The Mission Lane Visa® Credit Card is an unsecured credit card with an annual fee, but this fee could be relatively low based on your creditworthiness. The card offers no rewards, but it does allow cardholders the opportunity for a credit line increase after just seven months of responsible card use. Since this card is unsecured, you won’t need to worry about saving up for a security deposit. However, the minimum starting credit limit is considerably low, at just $300, which could make it difficult to manage your credit utilization ratio early on when the annual fee is charged to your account.
It’s important to note that the ongoing APR for this card is very high at 26.99 to 29.99 percent variable and will be determined by your creditworthiness. To avoid costly interest charges, do your best to avoid carrying a balance. You’ll also get access to basic Visa benefits and financial education tools with this card, including tools that will help you keep track of your credit utilization ratio and changes to your credit score.
Indigo Mastercard: Bad to fair (300-670)
This credit card is ideal for the credit rebuilder. Even if you’ve made a major financial declaration like bankruptcy, which can affect your ability to get a credit card, the Indigo® Mastercard® is still a viable option. You can skip the hard credit pull, which typically dings your credit for a short period of time after a credit card application. Whether or not you’ll have an annual fee is determined by your creditworthiness and the ongoing APR is in the middle of the pack for cards for bad credit, though it’s still fairly high at 24.90 percent variable.
This card has no rewards structure, but this factor may actually be helpful when it comes to putting a square focus on credit building. Your maximum credit limit is $300, which can be restrictive, especially if you end up paying an annual fee. An advantage is that this card is unsecured, so you won’t have to pay a security deposit. The card also reports to all three major credit bureaus so you can keep track of your progress.
How to choose a credit card for bad credit
- Nail down your exact credit score. The types of credit cards you’re eligible for will differ based on your credit score and plenty of other credit-related factors. Knowing exactly what your credit score is will help you navigate which credit cards you can feasibly be approved for, and also help you avoid behaviors that could damage your score like applying for too many credit cards in a short period of time.
- Be aware of the fees. A defining feature of many credit cards for bad credit is paying a bit extra up front as collateral in exchange for offering a line of credit. This collateral most often comes in the form of security deposits on secured credit cards and annual fees for many unsecured cards. Sometimes, a card will require both. Credit cards for bad credit also tend to have high ongoing APRs and rarely have intro APR offers. The best credit cards for bad credit have either a reasonable annual fee or a reasonable security deposit (try to avoid cards that require both) a lower-end ongoing APR and plenty of credit-building incentives.
- Keep credit building top of mind: An advantage of credit cards for bad to fair credit scores is the potential to help you build an even better score over time. You should always look for a card that reports to the major credit bureaus, as those entities will record your credit-building progress. Also look for cards with incentives for positive credit habits, like credit limit increases, or cards that have the option to graduate to a more lucrative or unsecured credit card version.
How to improve bad credit
A primary facet that determines what credit cards you’ll be approved for is your credit score. The more you can improve your credit score, the better your chances of accessing higher-quality cards over time. As you become a lower-risk borrower, you won’t have to spend as much on the collateral requirements for cards geared toward people with 500 credit scores or lower.
Another major point to consider is your ongoing interest rate. Interest charges are the most constant part of all credit cards and they can prove to be expensive if you often carry a balance. Usually, the better your credit score, the more opportunities you have to secure a lower interest rate. If you follow a few core tips to build your credit consistently over time, you’ll be on to a better score in no time.
- Always pay on time. Your payment history makes up 35 percent of your credit score and missing a payment can have drastic consequences. Consider setting up automatic payments or making a note in your calendar to ensure you always pay your bill on time.
- Opt for a low credit utilization ratio. Try to use only a small amount of the credit available to you by setting up a few recurring bills on your card or only using it for budgeted outings. Your credit utilization ratio makes up the second largest chunk of your credit score after payment history; a lower credit utilization ratio signals to lenders that you aren’t relying too heavily on your credit card for financial security and that you’re managing your credit responsibly.
- Watch your credit report. Understand how to read your credit report and keep a keen eye out for errors like an unfamiliar employer or an incorrect middle initial. Small errors like these can be a drag on your credit score or even hint to identity theft, so it’s best to always be fully aware of your financial standing.
- Keep your starter credit card. Another key facet of your score is your credit history and the longer your history, the better. Your starter card will often be your first and oldest credit account, which will still boost your score well after you outgrow the card. Consider keeping the account open (as long as it doesn’t charge maintenance fees), even if you don’t use it or you graduate to better cards.
The bottom line
Don’t think that a 500 credit score leaves you out for the count on accessing decent credit cards. Sure, you won’t get to the most lucrative rewards rates and lowest fees right away, but you can build your way over time with responsible habits. Be sure to pick a card that reports your progress to the major credit bureaus, never miss a payment and keep your credit utilization low. These key steps, when done consistently over time, can lead you in the right direction.