To repair credit, you’ll need to prove you can handle credit responsibly. But that can be hard to do, if you’re getting turned down for credit cards because of your poor history. Luckily there are actually a bunch of credit cards for bad credit out there. You just have to know where to look.
Your credit card for bad credit
Poor credit demands some tradeoffs in return for lenders taking a chance on you, so bad credit credit cards often come with annual fees, high interest rates, low credit limits or required collateral. Still, used responsibly, these cards offer the opportunity to improve credit and become eligible for better offers. Here are the most common types of credit cards for people with poor credit:
Secured major credit cards
These cards require an upfront deposit, typically equal to or greater than the card’s credit limit that the lender holds as collateral. You may also have to pay annual fees as well as a higher than average interest on balances carried. The advantage is that these cards are accepted at almost all retailers, so you get lots of chances to prove your creditworthiness.
Store credit cards
When stores struggle to bring in customers, it spells good news for people with bad credit. Many retailers have relaxed credit requirements for store cards in an effort to increase their customer base. Although store credit cards tend to have very low credit limits and high interest rates, they’re often available to people with very poor credit scores, and their low limits decrease the risk of getting in over your head.
High fee unsecured cards
No collateral is required for these cards, but they’re not generally recommended because of their sky-high fees and interest. It makes more sense to rebuild credit with secured and store cards and then trade up to unsecured major credit cards when your credit score improves enough to qualify you for those with more-favorable terms.
» MORE: Credit cards for bad credit
To make the most of bad credit credit cards:
- Don’t apply for multiple cards at once; this actually lowers your credit score.
- Apply only for credit cards for bad credit to avoid rejection and extra hits to your score.
- Keep any balances low. Carrying balances close to your total credit limit (known as credit utilization ratio) harms your credit score.
- Try to pay your balance in full every month.
- Avoid offers with annual fees above $50 or interest rates over 30%.
- Monitor credit score regularly to track progress.
As you prove creditworthiness, your credit score will climb. Before long you’ll be eligible for the best credit card offers as well as the wide range of benefits excellent credit brings.
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