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From the Experts at Credit.com

How To Get a Credit Card With Bad Credit

by Gerri Detweiler

Find out from our experts how you can get a credit card with bad credit and learn what credit cards for bad credit look like and what you should be paying.

It’s truly a Catch 22: you need a credit card to rebuild your credit, but how do you get a credit card with bad credit? Millions of people across the country have found themselves in this dilemma after the recession, so you are definitely not alone.

The good news is that there are lenders out there who want your business. While issuers may not be marketing as aggressively to consumers with poor credit as they did a few years, ago, some are offering programs to these people. In fact, some studies have found that more than a million borrowers with severely damaged credit ratings are now opening credit card accounts every month!

Credit Cards for Bad Credit: You Still Have Options

With bad credit, you’ll have fewer options than if your credit scores are great, but that doesn’t mean you shouldn’t shop around. Some credit cards can carry high fees or interest rates, and you’ll want to find the best possible card for your situation.

The first thing you’ll want to do is to check your credit reports and your credit score. You may have some idea of how “bad” your credit is, but you really won’t know until you check it. You can get your credit score for free using Credit.com’s free Credit Report Card. You’ll see what factors are affecting your scores and get strategies for getting back on track. It’s also a good idea to check your credit reports with all three major credit reporting agencies to understand what’s being reported and to make sure the information is accurate.

What’s a bad credit score? It’s impossible to say exactly since there are many different credit scores available to lenders, and every lender decides for itself what credit scores are acceptable.

My Credit Score is 500 (or below)

If you have a credit score below 500, qualifying for a traditional card will be extremely difficult, if not impossible. Most lenders view scores below 500 as a very high credit risk, and are therefore unlikely to approve a credit line. You may wish to consider a secured credit card as an alternative. With a secured credit card a security deposit is required as collateral, typically equal to the credit limit on the card. The security deposit offsets the risk for the lender because it serves as a guarantee in the unlikely event that you default on the card. Like traditional credit cards, secured credit cards come in many shapes and sizes and it’s important to shop around before settling on one. Not all lenders offer secured cards so be sure to do your research and review the features each card offers. In addition, not all secured cards report your payment history to the three credit bureaus. If you’re trying to reestablish your credit, choose a card that reports to all three so that your hard work in managing the account properly is reflected in your credit scores.

My Credit Score is 550

If your credit score falls in the 550 range, you may still have difficulty securing a traditional credit card. While it’s higher than those in the lower 500s, a 550 is still quite low when it comes to credit scores and is considered a high risk by lenders. As with those in the lower 500s, a secured credit card may be a better option initially. We’ll talk more about secured cards in a moment.

My Credit Score is 600

Credit scores in the 500s will likely force you to obtain a secured credit card, but once you break into the 600s, you may qualify for a traditional unsecured credit card with some lenders. However, you may still face some obstacles in qualifying for a regular credit card because most lenders will still view you as a high credit risk. As a result, the cards you qualify for will most likely come with high interest rates and fees. Scores in the low 600s have more options than those in the 500s but they’re still considered high credit risks to potential lenders.

My Credit Score is 650

If your credit scores fall in the 650s you should have little trouble qualifying for a traditional credit card. It’s important to note that even though scores in the 650 range have an easier time qualifying for traditional credit offers, it still falls within the poor credit range known as subprime and is considered “high risk” by lenders. This means you can likely expect high interest rates and possible fees until you demonstrate a positive payment history and your credit improves. Over time, as your credit improves and you break into the 700s, you’ll be able to take advantage of all the benefits that having great credit affords: the best interest rates and terms lenders have to offer.

You can see from this why it’s so important to know your credit score before you apply for a card. You don’t want to to waste time applying for a card you can’t get, and there can be a big difference in terms of cards available to someone with bad credit versus someone with fair credit, for example.

Once you know where you stand credit wise, you’ll want to shop for a credit card. If your credit score is very low, you may need to get a secured credit card. With a secured card, you place a deposit with the issuer and get a card with a credit line that is usually equal to your deposit. So, for example, you place a security deposit of $250 and your initial credit line is $250.

You use secured cards for bad credit like you would any other credit card. You charge items, then pay the bill. Note that this is different from a prepaid card, where you load money onto the card, then spend it, then do that again. Prepaid cards don’t report to credit reporting agencies, but most secured cards do. With a secured card, if you manage the account properly (pay your bills) you will get your deposit back when you close your account.

Need help finding a secured card or credit card for bad credit? When you sign up for Credit.com’s free Credit Report Card you will be matched with lenders who are likely to be a good fit.

Moving Forward

Once you get one of these cards, you’ll want to keep your balances low, and pay your bills on time every single month. Two of the most important factors in your credit scores are your payment history and your “utilization ratio” – which compares your balance to your available credit. Make sure these two factors are as strong as possible and you should, over time, see a significant positive impact on your scores.

Tip: Using Credit.com’s Credit Report Card, you can get a free updated credit score each month and track your progress toward building better credit.

After you have one of these cards for a year or so, you may want to try to apply for an unsecured card with better perks and fewer fees. However, if you do that, you may want to keep this first card open for a while longer. Unless you need to get your deposit back right away (or if it carries a high annual fee), you can continue to use it from time to time for things you’d buy anyway, and pay the bill in full. By doing that, it will continue to help you rebuild credit.


  • Ronald Tucker

    Excellent advice for rebuilding credit using a credit card(unsecured) to improve credit score. Last June 2013 I obtained a n unsecured credit card with a score of 589. By using the card responsibly(pay bill on time and keep credit utilization below 20% of available credit) I have increased my score(s) to 652 on Experian , 653 on Equifax, and 622 on Transunion.

  • Ronald Tucker

    My goal is to obtain a score in the 700+ range. It will take time but will be well worth the wait when I obtain “good credit” with all the perks that comes with having a score in the 700+ range. I will only apply for credit when I really need it. I’ve learned my personal finance lesson! :-)

  • GuyFrom ThatThing

    Ronald,

    I know moving from a secured to an unsecured credit card once you are in a position to qualify is a smart move that can improve your credit score right off the bat (in addition to the future possibility of the satisfied creditor granting you a higher credit limit, improving used/available credit ratio that would ultimately continue to move the needle positive for your Credit Score).

    A word of caution however: many creditors of unsecured credit cards will give you secured card after you’ve proven yourself, but as a separate card entirely.

    Some creditors (very few from what I’ve seen) allow you to “graduate” your secured credit card to a unsecured credit card (i.e., use the exact same account you had for secured, return your payment to you, move forward with the unsecured credit card with them under the exact same account [without opening or closing any accounts]). The only company I’ve seen do this is Bank of America (believe it or not).

    Most creditors require you to open a new / separate account for unsecured card; and if you want your cash payment for your secured credit card back you will have to “close” that account with them and then they will return it.

    The opening and closing creates noise in your credit report (although I’m not exactly sure how much score it affects), but it is noise that you probably don’t want or need nonetheless.

    The secured credit card that can be later be graduated to unsecured card is the best route to take if you can.

    Good luck.

  • http://www.Credit.com/ Gerri Detweiler

    Have you tried a secured credit card? Those are usually available even to consumers with bad credit. You can shop for and apply for a secured credit card here.

  • carrdude

    I have the best card in the world, debit card is the cheapest plus I pay it off at each transaction. :]

    • http://www.credit.com/ Credit.com Credit Experts

      That is certainly true, though a debit card lacks some of the protections credit cards offer. However, in the case of a data breach, a prepaid card can make some sense because it doesn’t give someone access to your entire checking account. See The Pros & Cons of Prepaid Debit Cards.

  • Jacqueline Lynn

    At 70 I was forced to file bankruptcy. I went from a 785 to 620. With a Credit One card I moved back to 725! Then they wanted to increase my annual fee from $75 to $99 !!!! When I objected they offered to lower my % by 4 points but would not move on the fee. I canceled the card AND AM LIVING WITHOUT ONE FOR THE FIRST TIME IN 50 YEARS!!!

    • http://www.credit.com/ Credit.com Credit Experts

      If you were concerned about credit scores, we assume you might still prefer to have a higher one, or some of the protections offered by credit cards. While it is certainly possible to live without a card, if you want one, you could consider applying for a no-fee card for someone with a similar credit profile. You can compare credit cards on Credit.com and find one with terms that are better than those offered.

      • 440sixpack

        The best protection for using credit cards is not getting into a situation where “protection” is needed in the first place. Those of us who use cash for everything from groceries to homes and cars live a lifestyle far different from our unsecured neighbors. The only credit history I have is a short-term mortgage and a short-term auto loan – both paid off within a year or so. I haven’t bothered to check my credit score because I honestly don’t care what it is. Given the risks associated with the credit transaction business, sleeping good regularly is a plus – nobody is tracking me, nobody is profiling me, and nobody is trying to steal from me. Over here on this side of the tracks, if you can’t pay cash for what you want, you can’t afford it.

  • Keo

    Counter-intuitively, you will have a higher score if you carry many cards (10 or more- I don’t carry that many, it is just not right). Closing an unneeded card changes your utilization ratio unfavorably, and you lose the good payment history.

    They are looking for a good mix of loans and credit accounts, but the old, frugal, responsible ways of handling credit don’t seem to mean much. So sad.


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  • Meet Our Expert

    gerri_detweiler GravatarGerri Detweiler is Credit.com's Director of Consumer Education. She focuses on helping people understand their credit and debt, and writes about those issues, as well as financial legislation, budgeting, debt recovery and savings strategies. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis as well as host of TalkCreditRadio.com.
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