If you have bad credit, getting approved for a credit card can be tricky.
When credit card companies approve you for a card, they're basically loaning you a certain amount of money to spend however you like. Depending on what your limit is, this amount may be as little as a few hundred bucks or as much as tens of thousands of dollars. So how do they decide who to lend to and how much to trust them with? It all comes down to a little something called a "credit score." If your score has managed to dip below 630, then you've fallen into the "bad/poor" credit score zone. Here is our list of best cards for consumers with bad credit.
WalletGeek's Best Cards for Bad Credit
The Shady Credit Zone :
If your score has managed to dip below 630, then you’ve fallen into the “bad/poor” credit score zone. This is going to make lenders a bit more hesitant to lend you money and if they do, it will likely come with a higher interest rate. That said, a bad credit score doesn’t have to stay that way forever. Ironically, getting a credit card and reestablishing credibility by making your payments on time is a great way to help your credit score make a comeback. That’s why some cards are designed specifically for people in this situation.
If you’re shocked to find that you have bad credit even though you’ve never even had a credit card, then don’t worry. This is actually fairly common and just means that you haven’t really had a chance to establish whether you’re reliable about making payments or not. While credit card companies have no evidence you won’t repay them in a timely manner, they have no evidence that you’re a stickler about it either.
What Else Can Hurt My Credit Score?
Aside from not having a credit history or having a relatively unflattering one, several other factors can also bring your score down. The main factors that go into determining your credit score include:
Your Payment History
The biggest factor in determining whether your score is great or not so great is how often you pay your bills on time. While being a day or two late may not do too much damage to your score, you’re likely to see it take a hit when you’re over 30 days late on a payment.
How Much You Already Owe
Your credit score factors in both how much available credit you’ve already got and how much of it you’ve already used. Generally, the closer your current lines of credit are to being maxed out, the lower your score will drop. It’d be like a friend asking you to borrow money after they’d already borrow $500 from five other people. It might make you think twice about trusting them to ever actually pay you back.
The Length Of Time You’ve Maintained Credit
The longer you’ve had a line of credit and managed to stay in good standing with the lender, the better your score will be. Say, for instance, that you pay off a credit card and don’t plan to use it again. If you don’t have to pay an annual fee to keep it open, it can actually help build your credit if you do. If you’re worried about getting into debt again, you can even cut the card up, use the card number once a year to buy something online, and pay it off immediately. As strange as this sounds, the longer you keep an account open with no problems, the higher your score will be.
What Types Of Credit You Have
Though it’s best not to run out and get eight different loans when you’re just starting out, you’ll notice that your score will go up as you take out different types of credit. These can range from credit cards to car loans to mortgages. While different types of loans can boost your credit, keep in mind that they won’t do you any favors unless you make the payments on time!
How Many Times You’ve Applied For Credit
If you’re going to apply for a credit card, then make sure to be picky before you send in your application. Applying for several different cards at once can make you look desperate and hurt your score in a big way. Even a single application may knock your score down a few points, but it’s usually only a temporary thing.
The Best Cards for Rebuilding Bad Credit :
While your credit score will play a big factor in whether you can get approved for a credit card or not, some companies will also consider things like your income and other factors. Though it’s going to be a bit harder to get approved for a new line of credit, it’s not impossible. That said, it’s highly recommended that you pay off your old creditors before attempting to open a new card to help rebuild your financial reputation.
When the time comes, secured credit cards are a good place to start. A secured credit card is basically one that you agree to put down a security deposit on if you’re approved for. Usually a few hundred dollars or so, the deposit is the credit card company’s collateral in case you don’t end up paying your bill.
If you do pay your bills on time, you’ll not only boost your credit score, but you’ll also eventually be able to upgrade your account to a regular card. Upon upgrading, you’ll get the security deposit back, along with the assurance that you’re on the road to financial redemption.
There’s also a chance that you could get approved for a regular or “unsecured” credit card, but be wary of any that will approve you if your score is in the poor zone. They tend to come with incredibly high-interest rates and confusing terms. While they may help you build your score in the short run, they’re not the kind of card you’re going to want to keep around for very long. Closing them can hurt your credit score and the risk that they’ll only get you into deeper debt is much higher.