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Navigating the world of finance with a bad credit score can be challenging. But don’t despair—there are credit cards designed specifically to help those with poor credit rebuild their financial standing. In this comprehensive guide, we’ll walk you through the best credit cards for bad credit, discussing their benefits, drawbacks, and how you can apply for each.
Why You Need a Credit Card for Bad Credit
Poor credit can make it challenging to get approval for a traditional credit card. However, a credit card designed for individuals with bad credit can be a useful tool for rebuilding credit history and improving credit scores.
- Understanding Your Credit Score
Before applying for a credit card, it’s essential to understand your credit score’s current standing. Your credit score is a numerical representation of your creditworthiness, i.e., how likely you are to repay borrowed money. A lower score often signifies a higher risk to lenders, resulting in unfavorable loan terms or outright denial of credit.
You can check your credit score through free credit score monitoring programs offered by various financial institutions. Some popular options include CreditWise by Capital One, Credit Scorecard by Discover, and Credit Journey by Chase.
- Reading Your Credit Report
Your credit score and credit report are distinct, yet closely linked. Your credit report lists your financial activities, like late or missed payments, which directly impact your credit score. By reviewing your credit report, you can identify the specific activities that most affect your score and strategize ways to improve.
You can request a free credit report each year from the three major credit bureaus at AnnualCreditreports.com.
- Exploring Preapproval Offers
Preapproval offers can provide a glimpse into the credit products you’re likely to get approved for. These offers commonly involve a soft pull on your credit, which doesn’t impact your credit score. Once you have your results, explore your options. If your preapproval results include primarily credit cards for bad credit, these are likely the cards you’ll have a higher chance of approval.
You can check for preapproval using tools like Bankrate’s CardMatch™.
Secured vs. Unsecured Credit Cards for Bad Credit
Bad credit can be a result of various financial challenges. However, regardless of the reason, you have two primary options when it comes to credit cards for bad credit—secured and unsecured cards.
- Secured Credit Cards
Secured credit cards require a security deposit, which typically matches your credit limit. They are an excellent option for those with poor credit, as they pose a lower risk to the card issuer. The deposited fund serves as collateral, reducing the issuer’s risk and making approval more likely.
- Unsecured Credit Cards
Unsecured cards, on the other hand, don’t require a security deposit. They are extended based on the applicant’s creditworthiness. While unsecured cards may seem more appealing, they typically come with higher interest rates and fees.
How to Choose the Right Credit Card for You
When choosing a credit card for bad credit, consider the following factors:
- Reporting to Credit Bureaus: Choose a card that reports to at least one of the three major credit bureaus (Equifax, Experian, and TransUnion). Consistent payments will reflect on your credit report and gradually improve your credit standing.
- Low Fees: Many cards for bad credit come with high fees. Aim for a card that minimizes the costs of owning the card.
- Ability to Upgrade: Some secured cards allow you to “graduate” to an unsecured card after consistent on-time payments. This negates the need to open a new account once your credit improves.
Review of the Best Credit Cards for Bad Credit
Now, let’s delve into the details of the best credit cards for bad credit.
Discover it® Secured Credit Card
Discover it® Secured Credit Card offers several unique features. With no annual fee and up to 2% cash back on purchases, it’s an excellent option for those with bad credit looking for rewards. The card also provides a pathway for upgrading to an unsecured card, making it a top choice for credit rebuilding.
- Pros: No annual fee, rewards program, and potential to upgrade.
- Cons: Requires a security deposit.
- Ideal for: Individuals looking for rewards and an upgrade path.
- Apply here
Capital One Quicksilver Secured Cash Rewards Credit Card
Capital One Quicksilver Secured Cash Rewards Credit Card is a standout for its low fees and cash back rewards. It requires a security deposit but offers rewards of 1.5 – 5% cash back.
- Pros: No annual fee, cash back rewards.
- Cons: Requires a security deposit.
- Ideal for: Those seeking a low-cost card with good rewards.
- Apply here
OpenSky® Plus Secured Visa® Credit Card
OpenSky® Plus Secured Visa® Credit Card doesn’t require a credit check or a bank account, making it accessible for anyone, regardless of credit history.
- Pros: No credit check or bank account required.
- Cons: Your credit limit equals your refundable security deposit.
- Ideal for: Individuals seeking a card with no credit check.
- Apply here
U.S. Bank Altitude® Go Visa® Secured Card
The U.S. Bank Altitude® Go Visa® Secured Card offers a $0 annual fee and rewards of 1 – 4 points per $1 on purchases, making it an excellent choice for those looking for rewards.
- Pros: No annual fee, points rewards.
- Cons: Requires a refundable security deposit.
- Ideal for: Those whose spending habits align with the card’s rewards categories.
- Apply here
Final Thoughts
Having bad credit doesn’t mean you’re excluded from the world of credit cards. The key is to find the right card for your circumstances and use it responsibly. By making timely payments and keeping your balance low, a credit card can be a valuable tool in improving your credit score. Remember, the road to better credit isn’t a sprint—it’s a marathon. But with patience and discipline, you can regain control over your financial future.
FAQs
- Can I get a credit card with a credit score of 580?
Yes, you can get a credit card with a credit score of 580, but your options will be limited. You may need to consider secured credit cards, which require an upfront deposit.
- Can I get a credit card if my credit is poor?
Yes, it is possible to get a credit card if your credit is poor, but your options will be limited. Secured credit cards are typically easier to get approved for than unsecured cards.
- Can I get a credit card with a credit score of 570?
Yes, you can get a credit card with a credit score of 570, but your options may be more limited, and you may need to consider a secured credit card.
- How can I rebuild my credit from a score of 580?
The best way to improve your credit score is to consistently pay your bills on time and work on reducing your debt. Consider tools like Experian Boost™, which can help enhance your credit report with additional positive payment history.
