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Christine ran her own business developing and managing insurance and financial services. This stoked a passion for points and miles and she now has over 2 dozen credit cards and creates in-depth, deta...
With years of experience in corporate marketing and as the Executive Director of the American Chamber of Commerce in Qatar, Keri is now Editor-in-Chief at UP, overseeing daily content operations and r...
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If you’ve struggled with managing credit, you’re not alone. Maybe you succumbed to the barrage of incoming credit card offers during college and are still working to pay off the residual debt, or you were laid off from your job and struggled to make ends meet.
Regardless of the reason your credit history may be less than perfect, bad credit can hurt you in multiple facets of life. You’ll pay higher interest rates for credit and may be rejected when applying for credit, an apartment, a car loan, or even employment.
The good news is you can improve your credit score, and we’re here to help you start the process. We’ve compiled a collection of tips, resources, and card recommendations for those with bad credit who would like to get on the road to improvement. Let’s get started.
Experian, Transunion, and Equifax are the 3 major credit reporting agencies. Experian offers the most educational information to consumers, so we’ll use their definition for bad credit.
Experian defines bad (poor) credit as a credit score between 300 and 579 and a fair credit score as 580-669.
If you don’t know your credit score, finding out where you stand is the most crucial first step. If you’re in the 300-579 range, you might set an initial goal of improving your credit score to the “fair” range.
Beyond that, you can move up to a good, then excellent credit score and eventually reap the rewards these higher levels of credit give you.
How To Find Out Your Credit Score
You don’t have to pay to get your credit score, as there are plenty of ways to access it for free. Discover has a free credit score check tool, and you don’t need to be a customer to use it. Credit Karma(review) and Credit Sesame(review) are 2 other options for accessing your credit score without charge.
If you have bad credit, it can cost you in so many ways. You’re charged more for credit products, and getting back on track may seem like a daunting process. Bad credit can lead to:
Being denied for an apartment
Being denied for certain employment
Inability to finance a vehicle or high interest rates
Higher insurance premiums in some states where credit is used as a factor to determine your insurance rates
Problems getting a cell phone, such as larger down payments or required pre-payments
Inability to put utilities in your name or a large deposit may be required
Higher interest rates if you’re able to qualify for a loan
Hot Tip: Bad credit doesn’t have to be permanent, and you can improve it incrementally over time. One of the best ways to improve your credit score is to prove you can manage credit again by opening a credit card and using it responsibly.
Getting a credit card and managing it well may seem like it’s easier said than done, but there are options available for rebuilding or building credit, and even small positive steps make a difference.
2 Risk-free Ways To Find a Credit CardMatch
CardMatch: A Risk-free Step To Finding a Credit Card
Did you know you can find out if there are credit card offers you may qualify for without having to apply formally? Credit card offers used to come in the mail, but now you can access these offers digitally on CardMatch.
The CardMatch tool is simple to use and doesn’t affect your credit score because there is no hard pull on your credit report. CardMatch works with credit card issuers who are looking for consumers that match with their credit card product offerings.
Where To Look for Pre-qualified or Pre-approved Credit Card Offers
There is another risk-free way to find out if you have any pre-qualified or pre-approved credit offers available. Many credit card issuers have a tool on their website where you can input your information to see if you have any offers available.
With bad credit, there won’t be many, if any, credit cards you’re pre-qualified or pre-approved for, but you risk nothing by completing the simple online forms and finding out. Your credit score will not be affected.
Hot Tip: Being pre-approved or pre-qualified does not guarantee approval for the credit card. It just means the credit card issuer has determined you might be a fit for their card. You’ll have to complete a formal credit card application to find out if you’re approved for the card.
To learn more about how to find out if you’re pre-qualified or pre-approved with any of these credit card issuers, check out our complete guide.
Bottom Line: Before applying for a credit card, use the CardMatch tool to find out which credit cards might be right for you – and to find offers that have been matched to your credit score.
The 5 Best Secured Credit Card Choices for Bad Credit
Credit card options for consumers with bad credit often have excessive processing fees and high annual fees like those that come with the Total Visa. And then there are secured cards, requiring a security deposit that may be held indefinitely.
Even with bad credit, you can find a card that will help you rebuild or build your credit history without being charged a high annual fee or excessive servicing fees.
When you’re seeking a credit card and your credit history is less than perfect, a secured card is an option that can help you get back on track. Secured cards typically require a refundable security deposit that is held by the credit card issuer to ensure you make your payments on time and manage the card well.
Secured credit cards can come with high annual fees and additional monthly service or processing fees, so it’s essential to select one that minimizes this extra expense.
Here are our recommendations for the best credit cards for bad credit.
The Capital One Platinum Secured card is perfect for rebuilding or building your credit as it comes with no annual fee, the required security deposit can be less than comparable secured credit cards, and the security deposit can be spread out over several payments.
It offers:
No annual fee
The ability to spread the payment of the security deposit over time
An initial credit line of $200 upon making the minimum required security deposit
Access to a higher credit limit after the first 6 months of on-time payments; no additional deposits needed
Reports to the 3 leading credit bureaus
Bottom Line: You don’t need a large credit limit to begin rebuilding your credit. Even a $200 credit limit, if managed wisely, can help you improve your credit score.
You probably didn’t think you could earn rewards with a secured credit card, but the Discover Secured card proves that you can have it all. This solid credit card offers benefits rarely seen with a secured credit card:
No annual fee
2% cash-back at gas stations and restaurants up to $1,000 in purchases each quarter
1% cash-back on all other purchases
Cash-back matched at the end of your first card anniversary
Redeem cash-back for statement credits, cash, or Amazon purchases
Reports to the 3 top credit bureaus
Minimum $200 security deposit, which can be refunded with as little as 8 months of responsible card management
Building a credit card history with Discover can be beneficial, as they offer a portfolio of excellent rewards-earning credit cards you may want to apply for in the future.
If you are an active military member, former military, an eligible family member, or a cadet/midshipman, you can join the United Services Automobile Association (USAA) and have access to a wide range of financial resources including a fine profile of credit card options.
Qualifying military personnel can also apply for a secured credit card through the Navy Federal Credit Union. The Navy Federal nRewards card earns 1 point for every dollar spent and has no annual fee. A $200 security deposit is required to obtain the card.
If none of the secured credit cards work for you, you could consider the Milestone Gold card. Cardholders will receive the following benefits:
Reports to credit bureaus
Gold Mastercard benefits
Pre-qualify option
Next-step Credit Cards
If you’ve managed your secured credit card wisely and established a positive relationship with the credit card issuer, you might be able to leverage that history and qualify for another, more rewarding, credit card.
It would be worth revisiting the CardMatch tool after establishing some history with your secured credit card to see if any new cards are available for you. Capital One, Discover, USAA, and Navy Federal Credit Union issue rewards-earning credit cards, so it’s also worth returning to those that have pre-approval options to see if new offers are awaiting you. There are also some instant-approval cards that require a lower credit score, but make sure you check your score beforehand to know where you stand.
Last-resort Prepaid Cards for Bad Credit or No Credit
If you were unable to qualify for any of the credit cards mentioned in this article, you could consider a prepaid card such as the Amex Bluebird Prepaid Debit card/account or PayPal Prepaid card.
A prepaid card can help you manage your finances, especially if you don’t have a bank account. You just load an amount when you obtain the card and then make purchases or bill payments as you would with a credit card.
The downside of prepaid cards is they don’t help build your credit, and they can come with a lot of fees including reloading, monthly maintenance, and withdrawal fees.
Review your credit report for mistakes. According to the Consumer Financial Protection Bureau, chances are good your credit report includes errors. Securing a copy of your credit report and reviewing it for errors is an excellent first step to improving your credit.
Don’t close your oldest credit card. One of the factors that make up your credit score is the length of your credit history. For this reason, you’ll want to keep your oldest credit card active as it will contribute positively to your credit score the longer you have it.
Contact debtors. If you owe money and you haven’t been paying on time, accounts can be turned over to collection companies and hurt your credit. Contact any delinquent accounts and make arrangements to pay to avoid the escalation and credit score damage.
Set up automatic payments. If you have existing credit cards, set up automatic payments to be taken out of your bank account. On-time payment history is a factor that makes up your credit score and automated payments ensure you’ll pay your bill on time.
Get a secured credit card and manage it well. Secured credit cards can help improve your credit score. You’ll have to come up with a security deposit, but it’s ordinarily refundable once you’ve proven you can manage the card effectively.
While there are limited choices for consumers with bad credit, there is a clear path for improving your credit and qualify for more rewarding credit cards.
Getting a secured card and managing it well will go a long way towards building or rebuilding your credit history. However, you’ll want to make sure you select a card with minimal fees, or the card can end up as an expensive choice.
Taking steps to improve your credit will reap the rewards with affordable credit and the greater benefits a good credit history can bring you.
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The information regarding the Discover it® Secured, USAA Secured Visa® Platinum Credit Card, USAA® Secured American Express® Card, Navy Federal nRewards® Secured Credit Card, Bluebird® American Express® Prepaid Debit Account, and PayPal Prepaid Mastercard® was independently collected by Upgraded Points and not provided nor reviewed by the issuer.
The information regarding the Capital One Platinum Secured Credit Card was independently collected by Upgraded Points and not provided nor reviewed by the issuer.
Featured Image Credit: wichayada via Adobe Stock
Frequently Asked Questions
Your credit report will not receive a hard credit pull when you use the Card Match tool. Credit card issuers work with Card Match to find consumers that match up with their credit card offerings.
You simply enter your information on the Card Match site and a list of any cards you might qualify for will be presented to you. Your credit score will not be impacted, so there is no risk in using the site.
No matter how many times you access your credit score, it will not hurt your credit. In fact, knowing your credit score is a good thing, so you should set credit score goals and check on your score regularly to see how it’s progressing.
Secured credit cards are different from regular credit cards because they require you to come up with a security deposit that is held by the credit card company while they extend you credit.
Many credit card issuers grant a credit limit for the card that is equal to the amount of your security deposit, but some may grant a larger limit depending on your credit history. Credit card issuers differ on refund rules, with options such as refunding after a certain number of years, after a number of on-time payments, or only when the credit card is closed.
Prepaid cards will not improve your credit because prepaid card issuers do not report activity on the card to any credit bureau. A prepaid card can be a convenient resource for managing your finances. However, it does not help you build credit. A secured card, if you can qualify, is a better option for building or rebuilding your credit.
While it’s an excellent idea to check your credit report, most sites that advertise a free credit report actually require you to sign up for paid credit services, so don’t be fooled. You can get a free credit report at Annual Credit Report.com, which is the only federally approved website to provide free credit reports.
Christine ran her own business developing and managing insurance and financial services. This stoked a passion for points and miles and she now has over 2 dozen credit cards and creates in-depth, detailed content for UP.
Disclaimer: Any comments listed below are not from the bank advertiser, nor have they been reviewed or approved by them. No responsibility will be taken by the bank advertiser for these comments.
2 comments
Alice
January 03, 2022
Is it possible to get any of the cards if I’m not an American citizen but only a frequent visitor?
Most U.S. credit cards require that you are a permanent resident, a U.S. citizen, or that you have a social security number. You may be able to use your international credit history if you have moved to the U.S. but do not have a social security number. Amex card applications have an option to select that you do not have any U.S. credit history (when asked for your SS#) and Amex will try to access your international history. This option is only valid for individuals moving to the U.S. from select countries.
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2 comments
Alice
January 03, 2022
Is it possible to get any of the cards if I’m not an American citizen but only a frequent visitor?
Christine Krzyszton
January 03, 2022
Most U.S. credit cards require that you are a permanent resident, a U.S. citizen, or that you have a social security number. You may be able to use your international credit history if you have moved to the U.S. but do not have a social security number. Amex card applications have an option to select that you do not have any U.S. credit history (when asked for your SS#) and Amex will try to access your international history. This option is only valid for individuals moving to the U.S. from select countries.
Any thoughts or questions? Comment below!
Email needed if you'd like comment updates. It will NOT be published.
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