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Will a Bad Credit Credit Card Hurt My FICO Score?

Dec. 17, 2014
Credit Cards
Will a Bad Credit Credit Card Hurt My FICO Score?
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Applying for a credit card for people with bad credit won’t hurt your credit score—at least not any more than applying for another credit card would. Here’s why.

What are bad credit credit cards, anyway?

Bad credit credit cards are actually useful tools for rebuilding your credit score, also known as your FICO score. The approval process is easier than for other types of cards, because the card issuer is accustomed to dealing with people who have hit a rough patch financially. And getting approved for any credit card at all gives you a chance to prove that you’re trustworthy.

If you’re looking at cards for people with bad credit but you’re still having trouble getting approved, try applying for a secured credit card. Issuers of these cards require a refundable deposit as an extra guarantee that you’ll use your card responsibly, and secured cards sometimes have lower annual fees and lower interest rates than unsecured cards for people with scores below 630.

If you pay your bills on time and keep your credit utilization ratio—that’s the percentage of your available credit you’re actually using—to 30% or less, your credit score shouldn’t suffer from the fact that you’ve applied for a card designed for people with poor credit.

But applying for any credit card at all causes your score to drop a little bit, and bad credit credit cards are no exception.

How new cards affect your credit score

Every time you apply for a credit card, your credit score slides by about 5 points, and every little bit counts when you’re already in bad credit territory. Applying for a lot of new cards all at once can take an even bigger toll, because research shows that customers who apply for six or more cards in quick succession are more likely to declare bankruptcy, according to FICO.

New cards also hurt your score because they bring down the average age of your credit accounts, and 15% of your credit score comes from the length of your credit history. Accounts that have been open for a long time boost your score, while accounts that were opened recently bring your score down.

The bottom line: Think carefully any time you open a new credit card, whether or not it’s a card specifically for people with poor credit. All cards have a similar impact on your credit score.

The important thing for your credit score is how you use your cards: whether you pay on time, whether you keep your balances low and how long you keep the cards open. The rest is just details.