Let’s be real: You probably aren’t going to score an approval for the Platinum Card from American Express or any other high-limit, low-interest cards until you fix your FICO score. We know this, you know this, and predatory lenders know this. We don’t want anyone to take advantage of you while you repair your credit, so we’ve compiled a list of common questions about credit cards for bad credit so you know what you’re getting into before you submit an application.
We’ve also broken down some confusing financial terms that you might see on your credit card application, statement, or acceptance brochure. Please let us know if we missed anything!
What is a credit card for bad credit?
When people talk about credit cards for bad credit, they’re referring to cards that have lax approval requirements. These cards cater to people with poor or fair credit who have FICO scores that range from 300 to 669. FICO scores from 300 to 579 are considered very poor, and scores from 580 to 669 are considered fair. When you have scores anywhere within this range, your chances of qualifying for traditional lending or benefit-heavy credit cards are generally slim.
Credit cards for people with bad credit are notorious for having low credit limits, high interest rates, and very few (if any) special features. If you’re reading this with a horrified expression on your face, you’ll appreciate the answer to the question below.
Why would I want a credit card if I have bad credit?
It’s unfair, but you can’t easily increase your FICO score unless you obtain credit and use it responsibly. This is a hassle when nobody wants to give you credit, which is why credit cards for less-than-perfect credit are a necessary evil. If you use your new card for a while without maxing it out or forgetting to pay your bill, other companies may offer you credit cards or loans.
New credit lines make up 10% of your FICO score, so you can give it a generous boost if you get a new card or two and use them carefully. Your payment history makes up 35% of your credit score, so a new card with a history of on-time payments can help balance out some of your late payments (commonly called “baddies” by folks who frequent credit repair forums).
Is having bad credit the same as having no credit?
Depends on who you ask. A lack of credit is different than bad credit or fair credit, but some lenders treat someone with bad credit the same way they treat someone with a 507 FICO score. That’s because you’re a wild card when you don’t have any credit; lenders don’t know what you’ll do with sudden access to their funds.
However, make sure you truly don’t have any credit before you apply for cards geared toward people with low FICO scores. Some people mistakenly assume they have no credit because they’ve never applied for credit cards before, but that’s not how things work.
If you’ve ever had student loans or a car loan, then you probably have credit. If you’ve ever paid a bill late and received a notice that your account was sent to collections, you have credit (but not necessarily good credit!). You also probably have credit if someone has sued you in small claims court or a landlord has ever filed an eviction notice against you, but these are both negative factors on a credit report. In other words, you don’t want them on there.
What credit cards are good for someone with bad credit?
We’re totally tooting our own horn here, but we think all the cards on our list above are good for someone with bad credit. After hours of research, we carefully selected the following credit cards as the best options for people with credit scores in need of some TLC:
- Capital One Secured MasterCard
- First Progress Platinum Elite MasterCard Secured Credit Card
- U.S. Bank Secured Visa Card
- Credit One Cash Back Rewards Visa
We chose these cards because they’re easy to get and have lower fees than many of the other credit cards we’ve seen for people with poor or fair credit.
What is the best credit card for someone with poor credit?
Our personal favorite is the Credit One Cash Back Rewards Visa because it has low interest rates (well, low compared to other credit cards for bad credit) and no annual fee. It even offers cash back on qualifying purchases - a feature rarely associated with credit cards for imperfect credit. It’s also bankruptcy friendly, and we know several people who got approved for this card immediately (within days!) after their discharge.
What are some common credit card terms and phrases?
It’s hard to pick the best credit card for bad credit if you don’t understand the terms of each financial agreement. Here are some important words and phrases you should know before you select a credit card:
APR - APR is an acronym for annual percentage rate. It refers to the amount of interest that you rack up on credit card purchases throughout the year. Many cards have a variable APR which means it changes based on data from a reputable economic index. You can find the daily prime rate in The Wall Street Journal.
Credit Limit - A credit limit is the maximum amount of money you can spend on your card. It varies depending on whether you have any pending purchases or authorization holds.
Initial Credit Limit - Your initial credit limit is the amount of money you can spend on your card after funding it with a security deposit or paying an annual fee or activation charge.
Annual Fee - An annual fee is the price you pay for 12 months as a cardholder. Some companies bill this fee in monthly installments (not to be confused with the monthly maintenance fee).
Monthly Maintenance Fee - Some companies bill cardholders for a monthly maintenance fee on each statement. This is not the same as an annual fee that is broken into multiple payments, and it’s possible to get charged a monthly maintenance fee and an annual fee.
Authorization Hold - When you book a hotel or reserve a rental vehicle, the company may place a temporary authorization hold on your card to make sure it’s valid. Some gas stations also do this when you pay at the pump.
Revolving Credit - This is a fancy way of saying that you can spend money, pay your bill for the money you spent, and repeat this process over and over with your card unless the account gets closed or frozen.
It’s also helpful to know these basic credit-related terms as you work on improving your credit:
FICO Score - FICO stands for Fair Isaac Corporation, which is a company that specializes in data analytics for credit. Your FICO score is a mix of new credit, payment history, current debt, types of credit, and duration of credit history.
Credit bureau - There are 3 main credit bureaus that receive information about your financial behavior: Experian, Equifax, and TransUnion. You have a right to view this info, but so do companies that consider giving you credit.
Soft inquiry - A soft inquiry doesn’t affect your credit score. It’s generally used for preapprovals, background checks, and self-initiated credit checks.
Hard inquiry - A hard inquiry can affect your credit score, and not in a good way. It remains on your credit report for 2 years. Some credit card companies run a hard inquiry when they analyze your application.
Applying and Qualifying
How do you apply for a credit card for bad credit?
When you’re ready to apply for a credit card for bad credit, visit the website of the card that you want or call the company’s phone number. You can also get a credit card through a financial institution such as a bank or credit union.
How can I get a credit card if I have bad credit?
Search for credit cards specifically designed for people with bad credit, and read detailed reviews (like our handy guide on the best secured credit cards) to help you make informed decisions. You can also search the Credit Pulls database to find out whether people like you are getting approved for the card(s) you want.
You might be tempted to go for the gold and apply for cards geared toward high FICO scores, but resist the urge. You aren’t likely to get approved (sorry!), so it’s not worth the hit on your credit report. Too many inquiries can lower your score, making it even harder for you to get a decent credit card.
What does it mean if I’m prequalified for a credit card?
A prequalification is not the same as a preapproval, so don’t hit the Apply button just yet. Prequalified offers generally come from marketing lists that contain financial information about people who haven’t opted out of the prequalification process. Sometimes the information is outdated, so you may not qualify by the time your prequalification notice arrives.
A preapproval means that you’re pretty much approved for the card, but there’s still a chance of rejection if your information doesn’t match what was found during the preapproval process. You may also have your preapproval cancelled if a credit card company finds out you lied or withheld vital info.
Do I need a job to get a credit card?
You don’t necessarily need a job to get a credit card, but ideally you’ll have some sort of income when you apply. In fact, it’s usually a requirement that you disclose your monthly or annual income on a credit card application.
You aren’t required to share financial information about student loans, alimony, or child support, but doing so may help you get a higher credit limit if you’re approved for a card. Some companies base your initial credit limit on your projected ability to pay - which makes sense, of course. After all, it’s hard to make monthly payments on a credit card if you don’t have some sort of regular income.
Can I get a credit card for bad credit if I don’t have a bank account?
Sometimes. Research and personal experience have taught us that credit cards known for approving people with bad credit usually expect applicants to have a checking account. It generally has to be a traditional checking account at a bank or credit union, not a digital checking account linked to a prepaid card.
Do I need a coapplicant if I have bad credit?
Not necessarily, but having one might help increase your odds of approval. That is, if your coapplicant has good credit. Two low FICO scores do not equal one excellent FICO score in the eyes of a credit card company.
Just remember that your payment history affects your coapplicant as well as yourself, so it’s essential that you pay your bill on time each month. It’s also worth noting that a coapplicant who shops with your card can file for bankruptcy and potentially stick you with the entire balance.
Why did I get rejected for a card when I have a higher credit score than my friend who got approved?
The credit world is unfair at times, isn’t it? It’s difficult to answer this question without personally reviewing both of your applications, but here are some common reasons why this happens:
- You have too many recently opened accounts
- Your debt-to-income ratio is too high
- Your friend recently had a bankruptcy discharged
- Your friend requested that an underwriter manually review her application after the computerized application process rejected the app
- You have a lower income than your friend
- You have too many late payments or accounts in collections that recently hit your credit report
Remember, rejections aren’t permanent. If you get denied for a card you want, reapply in 6 to 12 months. You can also contact the credit card company and request a letter that explains the reason(s) for denial so you know which issues to tackle before reapplying.
Secured Versus Unsecured Cards
What does it mean to have an unsecured credit card?
An unsecured credit card is a card that isn’t backed by a personal deposit. Most well-known credit cards from Visa, MasterCard, and American Express are unsecured.
What is a secured credit card?
A secured credit card has a credit line that’s financed by a cash deposit. In other words, you pay for your credit line and then get charged interest to spend your own money.
Some companies offer partially secured cards where you pay a predetermined deposit and then have access to a slightly higher credit limit. For example, you may pay $249 toward a card with a $300 credit limit.
How do you get a secured credit card?
You can generally get a secured credit card the same way you get a traditional credit card: By visiting your bank, applying online, or calling the phone number associated with a secured card.
Make sure you have funds in your checking account when you apply so you can pay your deposit right away. You can’t use your card until you fund it, so pay your deposit ASAP before the company rescinds the credit offer. Most of the cards we’ve researched give applicants 30 to 60 days to pay their deposit, but we’ve seen a couple generous companies that are okay with waiting 80 or 90 days for your cash collateral.
Can I graduate from a secured card to an unsecured card?
Sometimes, but it isn’t always an option. Your credit score is a mix of old credit and new credit, so it’s not necessarily wise to close a card you no longer need. If you’re not okay with potentially holding onto a secured card for years, talk to the company about graduation options before you apply.
If you do convert your secured card into an unsecured card, you’ll probably find yourself in one of these two situations:
- The credit card company increases your credit limit without requesting additional funds from you. That makes your credit limit a mix of your money and funds from the credit card provider.
- The credit card company upgrades your secured card to an unsecured card and refunds your security deposit. You keep the same card, and your account number does not change.
Do I get my deposit back for a secured card?
Many secured cards refund deposits if you meet their requirements. Sounds easy enough, right? Well, here are some factors that may disqualify you from receiving a refund:
- Fraud or major contract violations
- Defaulting on multiple payments
Even if you qualify for a deposit refund, you might not receive it automatically. Make sure you contact the company that gave you the credit card so you can file a claim for your money.
How can I get an unsecured card with bad credit?
If you’ve got bad credit, apply for an unsecured card with words like “rebuilding” or “repairing” in its description. These are cards geared toward people with credit scores similar to yours, so you have a better chance of approval than you do with cards geared toward people with excellent credit.
You can also review our list of the best credit cards for bad credit (scroll to the top of this page) if you need some ideas. We recommend the Credit One Cash Back Rewards Visa if you want a decent card while you focus on increasing your FICO score.
Can I get a secured card and an unsecured card?
Yes, you can have multiple cards as you work on building or repairing your credit. Just be careful not to apply for too many credit cards.
Rates and Fees
Does it cost money to get a credit card for bad credit?
It depends on what type of card you get, but we’ll admit that credit cards for people with poor credit often require money. You need a cash deposit for a secured card, and unsecured cards for people with low FICO scores often have activation fees, application fees, and annual fees. These fees protect card companies if you default on your payments.
If you want a card without a deposit or activation fee, we recommend checking out the cards that Capital One and Credit One offer customers with bad credit.
Why is my APR so high?
Credit is a privilege, not a right - and companies that cater toward people with bad credit make sure you remember this. They often jack up the APR for customers with low FICO scores because it helps provide a financial cushion if you default on your payments. If you have a 29% interest rate and miss a payment after 6 months, the company isn’t out much - if any - money.
How do I lower my APR?
All you have to do is ask. However, the company might say no or need some convincing, so prepare a solid argument that includes statements (make sure they’re true) about how responsible you are. Mention how you’ve paid your bill on time for 12 consecutive months, or talk about how you’ve kept your credit utilization below 30% the entire time you’ve had the card.
If you want to decrease your chances of getting stuck with a super-high APR before you apply for a card with different rates, make sure it’s the right time to apply. If you’ve recently paid off some debts or opened a bunch of new accounts, wait a few months before you get a new credit card. This gives your FICO score time to reflect - or recover from - the changes.
What happens if I don’t pay my deposit for a credit card?
You don’t have a credit limit, and your card gets shut down before you even activate the account. You don’t get in legal trouble or anything (unless your credit card contract says you owe the money within X days unless you want to face legal action, but that’s rare for accounts of this type).
However, this doesn’t erase any hard inquiries on your credit report that the company ran prior to approving you for a secured card. You can try to get a hard inquiry removed by contacting the company and explaining that you decided not to use the card, but the company doesn’t have to grant your request.
Improving Your Credit
How do you make bad credit good?
There’s not a one-size-fits-all technique that lets you make bad credit good, but here are some basic steps you can try:
- Pay your bills on time (this may sound obvious, but many people don’t realize how much late payments hurt their credit)
- Dispute inaccurate information on your credit report, even if it doesn’t seem important (remove that random phone number that isn’t yours!)
- Contact collectors and ask if they’ll remove late payments from your credit report
- Lower your total credit utilization so it’s below 30%
- Ask your student loan providers about forbearance and deferment plans if you’re behind on payments
Over time, you may qualify for better credit cards if you implement the suggestions above.
What is a credit monitoring service?
Many credit cards for people with bad credit offer complimentary credit monitoring services that let you track your daily, weekly, or monthly FICO updates. You may also receive notifications if a new account gets added to your credit report or if someone runs a hard inquiry during an application.
Will a prepaid debit card help me build my credit?
Nope, but it’ll help you destroy your credit if you fail to use your prepaid debit card responsibly. Prepaid debit cards don’t show up on credit reports unless you do something wrong like write a bad check (this is a possibility with Bluebird if you fail to preauthorize your check) or let monthly maintenance fees create a negative balance in your account.
But don’t panic if you find yourself in one of these situations. Prepaid debit card companies usually give you a chance to correct the issue yourself before they turn over your account to a collection agency.
How many credit cards should I have if I’m building my credit?
The average American credit card user has 3 or 4 different cards, but that doesn’t mean you need that many. You generally need at least 1 credit card if you want to build your credit, but you may need more if your cards have low limits. For example, a card with a $300 limit won’t boost your FICO much if you’ve got $35,000 in debt on your credit report already. Many cards for bad credit have low credit limits, which is why people with low FICO scores often get multiple cards.
Before you apply for multiple cards, make sure you can afford them. Monthly payments generally range from $25 to $50 per card (some are even higher!), which can kill your savings account if you’re living paycheck to paycheck.
Have unanswered questions? Sound off below so we can help!