Applying for a credit card is stressful enough without the weight of bad credit. The endless options, the complex numbers, the overwhelming deluge of advertisers vying for your attention. We’re here to clear the clutter and cut down confusion. Applying for a credit card with a bad credit score doesn’t have to be half as daunting as it may seem. Believe it or not, the process is fairly simple. If you follow this short guide, you’ll have a brand spanking new credit card in no time flat. Just remember, there is a credit card for everyone. No matter the state of your credit score, don’t give up hope.
1. Find out your credit score
First things first. Find out where you stand. Credit card issuers approve or deny applicants based on credit score. A credit score is a 3-digit representation of your creditworthiness, or how much lenders can trust you to pay back what you borrow.
Federal law grants you to a free credit report from each of the 3 major credit bureaus once a year. You can also take a free look at your report whenever you’re denied credit. But while credit reports contain essential information about your financial history, it does not include a free credit score.
The only way to get a free credit score is use a service like TransUnion or GoFreeCredit.com. These websites have monthly membership fees, but if you cancel your account within the 7- to 30-day grace period, you won’t pay a cent. So to get the ball rolling, sign up, grab your credit score and close your account.
2. Explore your options
Once you have your credit score, you’ll have an idea of what kind of financial products will be available. If you’re below 580, you’re not doing so hot (300 is the lowest possible score). If you fall in the 300-580 range, you can attempt to sign up for a regular credit card, but don’t be surprised if your application is rejected. It could prove difficult to find an unsecured credit card.
As a last resort, sign up for a secured credit card. A secured credit card works similarly to a regular credit card, but it requires a security deposit. Usually, the deposit is a couple hundred bucks and is refundable. Basically, you become your own lender. You put down money, borrow from that money and pay it back promptly to avoid interest. Secured cards come at no risk to card issuers, but they can help you build your credit score if you keep up with payments.
Do not even consider applying for a prepaid debit card. Why? They do NOT help you build your credit score, meaning you’ll never qualify for a better option. Use a secured card instead. And anyway, prepaid cards are plagued by heavy fees and terrible customer service. No one wants that.
3. Apply for a credit card
Now it’s time to apply for a card. Make sure you only apply through legitimate websites run by trustworthy, widely recognized companies. If you have any doubts whatsoever, don’t do it. Scam artists love to pray on credit card applicants, especially those desperate for a decent deal.
When comparing offers, make sure you know how to read a Schumer Box. A Schumer Box, which can usually be found under “Terms and Conditions,” contains vital information about the card offer. It displays the APRs, annual fees, foreign transaction fees and more. Always, always, always read the Schumer Box and look for red flags. For help, take a look at our guide on how to read a Schumer Box.
You should also look at independent credit card reviews and forum discussions. If you go to the card issuer’s website, you’ll see only glossy advertisements that rarely present a fair depiction of the product. See what other folks on the Internet have to say. We at NerdWallet pride ourselves on quality credit cards reviews, so feel free to start by clicking around the site!
If you’d like a good starting point, check out our favorite credit card for bad credit. The Capital One Secured card is one of the best deals you’re likely to find outside a credit union. The annual fee is only $29, and the minimum security deposit is $49, $99 or $200 depending on your credit score. It has a very reasonable 22.9% variable APR. If nothing else, use the Capital One Secured as a measuring stick. There’s no reason to pay more for a secured credit card.
4. Build credit, get a better card
Once you obtain a card, start building credit. Doing so is easy. Use your card for everyday purchases you would need make anyway, then pay off the sum shortly after. Making regular payments is the easiest way to raise your credit score. Once you get up around 600, start applying for low-level unsecured credit cards. You’ll be able to get back your secured card’s deposit and start using a credit card that actually operates under a true borrowing system. For a more detailed breakdown, check out our video on how to raise your credit score.
Use our prepaid card finder to save money and find better deals.