Searching for the best credit cards for bad credit can be a bit daunting…
Credit is so important when it comes to building a healthy financial profile and obtaining the purchases you may want but, applying to card after card when you have bad credit, can only make your credit worse if you are denied!
So it’s understandable that you may be a bit lost or intimidated by the search for the right card…
When looking for the best credit cards for bad credit, it’s important to understand the basics of credit and building good credit. Knowing the basics of good credit-building will only come in handy when you begin your search for the right credit card if your score is considered “bad,” “poor,” or even on the lower ranges of “fair”.
So before we get into the best credit cards for bad credit, let’s begin with a short crash course in Credit 101!
What is Credit?
Credit is usually in the form of borrowed money that is used to make bigger purchases. It is given out to consumers by a bank or a financial institution and the borrowed amount of money is paid back over a certain amount of time at an established interest rate. An interest rate can be seen as the “fee” for borrowing the credited amount of money.
Obtaining credit to make big purchases is usually a necessity, since things like homes and cars come with an extremely high price tag. The majority of consumers need a way to make the purchase without paying for it out right. Credit is an alternative that people can take as way to borrow lended amounts needed to make the purchase.
Why Good Credit Is Important
Good credit is the foundation of nearly every big financial decision you make.
Buying a home, renting a new apartment or house, buying a car, or even financing bigger items like furniture or a new computer are all examples of when your credit score may determine whether you are approved for making said purchase. Having good credit can make or break you when it comes to purchasing the items you may want. And gentlemen, if that’s not enough reason for you to think a good credit score is important, just ask the ladies if they care whether or not having a good credit score is matters to them – trust me, they care 😉
A Credit Score is a way for lenders and even landlords to know “how financially responsible” you are…
At the end of the day, a borrower with a lower credit score is seen as a higher risk.
After all, lenders want to make their money back in a timely and promising manner and landlords want to make sure their tenants can make payments each month without hassle or hardship.
A good credit score positions you to show lenders that you are willing and able to make on-time payments back to them.
It shows landlords that you are capable of paying rent.
And whether they admit it or not, it shows potential spouses or mates, that you are financially stable and able to help support the relationship.
Think of it this way: Are lenders going to give the car loan to the guy that has a perfect 800 score, or would they rather give it to the guy who has a score of around 500? Just like the early bird gets the worm, the higher score gets the loan.
This may not sound entirely fair- and it may not be in a lot of cases, but the fact of the matter is that this is, unfortunately, how the world of obtaining borrowed money works.
Which brings me to my next point…
Why Your Credit Is Bad
First, let’s quickly establish what may be considered as “bad” or “poor” credit.
According to the 3 credit bureaus, TransUnion, Equifax, and Experian, and this article on experian.com, the most common credit score, the FICO score, ranges from 300-850.
850 is the highest and best you can get, and 300 is lowest and worst you can get. Take a look at this chart to see where you stand:
There are a dozen reasons why someone may have poor credit but a few of the most common reasons why your credit may be considered bad are:
- You’ve stop using your credit
If you stop using credit, your credit will diminish. If you aren’t using it, you have no lines of credit reporting, and therefore the bureaus have nothing to establish a score with. So if you want to cut back on using your cards, try to use them to make a purchase here and there to keep the line of credit open and active so it continues to report- just don’t forget to pay the bill on time!
- You’re young and you have no established credit yet
Credit doesn’t appear out thin air when you turn 18. It takes time to build good credit. Some good ways to start building good credit if you’re young are to become a certified user on someone else’s credit card. This means that you will be able to use their line of credit with their approval. As you both use the line of credit, you will start to build credit of your own. Note: you will want to make sure the primary card owner has good credit and pay all their bills on time.
Another good way is to start with a secured credit card. A secured card requires the card user to put down a cash amount as collateral. For example, if you put down $1,000 for collateral, your line of credit would also be $1,000. You are then able to get the cash collateral amount back when closing the card.
- You’ve run late on your payments or needed to declare bankruptcy
I get it- money sometimes just gets tight and you are forced to make a decision that may hurt you financially. Regardless of what the reason for running late or declaring bankruptcy may be, these will always hurt your score. If you miss enough payments you will need to work to bring the bill current or wait for the bankruptcy to fall off your report in order to start reestablishing credit.
It’s Not Your Fault
Just because you have bad credit now, doesn’t always mean its entirely your fault.
Yes, of course you have the occasional one off consumer who just refuses to pay their bills on time for no apparent reason… but the far greater amount of people with bad credit got there for a legitimate reason, out of their control.
No one wakes up one day and says “I think I’ll miss my payment” or “I want to declare bankruptcy”…
While bankruptcy and late payments are both sure-fire ways to reduce your credit score, people don’t fall back on these because they want to.
The reason is almost always a substantial change in their financial situation… many of them totally unexpected like:
- A loss of job
- A demotion
- A dirty divorce that got out of hand
- Their health turned for the worse and they had to take a pay cut
- A foreclosure on their home
While dealing with over 10,000 consumers, these are some of the most common reasons people find themselves with bad credit.
None of these reasons are because the person is “irresponsible.”
Most have jobs. Most have families. Most are a good parents with kids and a spouse and they are forced to make the decision of whether to buy groceries this month, or run late on their mortgage.
So if you’ve found yourself in a bad spot with your credit, you’ve already made the right choice by looking up the best cards for bad credit. It means you want to make a change and working with the right credit cards will help you stay on track with your financial goals.
So let’s get down to the nitty gritty and talk the best cards for bad credit:
Best Cards For Bad Credit | Build Credit Score Now
In This Article:
Capital One’s Secured Mastercard
One of the best credit cards for bad credit is Capital One’s Secured Mastercard. It helps you rebuild your credit scores.
As a secured card, you pay a deposit before using it. The fee ranges from $49 to $200. Your credit score determines the exact amount. When you are approved for the card, you have a credit limit of $200.
A part of the reason why it’s one of the best cards for bad credit is its intrinsic reward. If you make payments on time for five months, then you can increase your credit limit.
The card doesn’t have an annual fee, so it’s a low-cost option. Keep in mind, though, the card has a variable interest rate.
The secured card reports your on-time payments to all three major credit bureaus. These are Equifax, TransUnion, and Experian.
It’s a revolving account as well. When you pay off the card each month, you have the full credit limit available the next month. You don’t put additional deposits on the card, so it’s not a prepaid card.
Discover’s it Secured Card
Like Capital One’s Secured Mastercard, Discover’s it Secured Card doesn’t have an annual fee. What makes it one of the best credit cards is it’s a rewards credit card.
As a reward, you receive 1% for every purchase. Gas and restaurant purchases offer 2% reward. After the first year of using the card, you get a dollar-for-dollar match for your reward points.
Your investment is only $200, which is your deposit.
Discover automatically reviews your account after eight months. When you make on-time payments monthly, you build your credit score. The company may now allow you to have an unsecured card.
OpenSky’s Secured Visa
OpenSky’s Secured Visa is one of the best credit cards for bad credit because you don’t go through a credit check. The company gives an opportunity to any individual who wants the card.
You pay a deposit on the credit card, and your credit limit depends on the amount. The minimum deposit is $200. By putting down a larger deposit, you will qualify for a larger credit limit.
The company does set standards for your income level. For example, you need to have a job with monthly income to qualify.
The upside is that you don’t need a savings or any bank account. You can make payments in different ways. These include wire transfer, money order, checking account, or debit card.
Besides the deposit, his card has a fee of $35 annually. OpenSky reports to all three credit bureaus. It doesn’t review your account for an unsecured credit card.
Indigo’s Platinum Mastercard
Indigo’s Platinum Mastercard is a good option if you filed for bankruptcy. You don’t need to wait for years before you can start fixing your credit history.
The card has an annual fee, but the amount depends on your credit score. It ranges from $0 to $99.
This is not a secured card. You don’t need to pay a deposit to qualify. It also offers a prequalification service. Fill out the questions and submit the form to determine if you qualify. If you don’t, they refer you to other helpful options.
Credit One’s Unsecured Visa
Credit One’s Unsecured Visa is one of the best credit cards for bad credit because it’s unsecured. It offers prequalification services.
The primary benefit of the credit card is the rewards program including cash rewards. It’s one of the cash-back credit cards. It offers 1% cash-back on all your purchases. It applies to restaurants, groceries, gas, or any other item you buy.
Keep in mind the card may have an annual fee ranging from $0 to $99 per year. Your credit score determines the fee you pay. Consider the cost before you apply for the card.
Milestone’s Gold Mastercard
Milestone’s Gold Mastercard is a good choice if you filed bankruptcy. The card doesn’t disqualify you if you did it.
You can use the prequalification service to determine your annual fee. It can range from $35 to $99. Consider this potential expense before applying. Using the prequalification service doesn’t impact your credit score.
You can build your credit by making monthly or bi-monthly payments. After you improve your credit score, you may qualify for a credit card with a rewards program.
You can also add a user to your account. It will cost you $25. Pay attention to the fees to avoid complications with your account.
One of the goals for improving credit history is to bring your score as close to 850. If you want to more about this perfect score, watch this video by Ask Sebby:
The best credit cards for bad credit are useful in many ways. They help you rebuild your credit score. They can assist you in times of financial emergencies. These cards even provide you with rewards.
Don’t forget, though, these cards are still personal loans. Pay them on time to avoid wasting the opportunity.
Do you own a credit card for bad credit? How’s the experience? Share your story in the comments below.