The 10 Best Credit Cards For Bad Credit

Camino Financial30 Jan 2024
The 10 Best Credit Cards For Bad Credit
Credit cards for bad credit can help navigate the financial landscape for those with a less-than-perfect credit score. They help people looking to rebuild their financial standing. While these cards offer a valuable lifeline, it's essential to tread carefully, making informed decisions to maximize benefits. This guide has everything you need to know to help you make the right choices for your fiscal future. Whether you're new to the world of credit or seeking a fresh start, understanding these tailored financial tools is key.

Top 10 Best Credit Cards for Bad Credit

Discover It Secured Credit Card

Discover it Secured

Best secured credit card

  • Intro APR: none
  • Regular APR: 28.24% (variable)
  • Security deposit: starting at $200
  • Annual fee: $0
  • Credit score needed: no credit required
  • Other features:
    • 2% cash back for gas and restaurant expenses
    • Unlimited 1% cash back on other purchases
    • Unlimited dollar-for-dollar match of all the cashback for the first year
    • You could upgrade to an unsecured card after 7 months
    • Reports to all 3 credit bureaus

OpenSky Secured Visa Credit Card

OpenSky Secured Visa

Best for low APR

  • Intro APR: none
  • Regular APR: 20.99% to 22.39% (variable)
  • Security deposit: $200
  • Annual fee: $35
  • Credit score needed: no credit check
  • Other features:
    • Reports to the main credit bureaus

Mission Lane Visa Credit Card

Mission Lane Visa Credit Card

Best unsecured credit card

  • Intro APR: none
  • Regular APR: 26.99% to 29.99% (variable)
  • Annual fee: $0 to $59
  • Credit score needed: for fair credit scores
  • Other features:
    • Reports to the main credit bureaus

Capital One Platinum Secured Credit Card

Capital One Platinum Secured Credit Card

Best no credit check card

  • Intro APR: none
  • Regular APR: 30.49% (variable)
  • Security deposit: $49, $99 or $200 (refundable)
  • Annual fee: $0
  • Credit score needed: no credit required
  • Other features:
    • When you use your Capital One Platinum secured card responsibly, you could get a higher credit line after 6 months
    • Reports to the main credit bureaus

Capital One Quicksilver Secured Cash Rewards Credit Card

Capital One Quicksilver Secured Card

Best for cashback rewards

  • Intro APR: none
  • Regular APR: 30.49% (variable)
  • Annual fee: $39
  • Credit score needed: for bad and limited credit scores
  • Other features:
    • 1.5% cash back on all purchases
    • 5% cash back on hotels and rental cars
    • You can get a higher credit line in 6 months

Avant Credit Card

Avant Credit Card

Best no-security-deposit card

  • Intro APR: none
  • Regular APR: 30.24% to 35.24% (variable)
  • Security deposit: none
  • Annual fee: $0 to $59
  • Credit score needed: for poor credit scores
  • Other features:
    • Credit limit of $300
    • Reports to the main credit bureaus

Secured Chime Credit Builder Visa Credit Card

Secured Chime Credit Builder Visa

Best for no APR

  • Intro APR: none
  • Regular APR: none
  • Security deposit: no minimum; you assign money from your Chime Spending Account
  • Annual fee: $0
  • Credit score needed: no credit check
  • Other features:
    • You need a Chime Spending Account with at least $200 in direct deposits
    • You can only spend what you've assigned as the security deposit
    • Maxing out the card doesn't affect your credit score
    • It offers an autopsy feature
    • Reports to the main credit bureaus

Self Visa Secured Card

Self Visa Secured

Best for starting small

  • Intro APR: none
  • Regular APR: 28.24% (variable)
  • Security deposit: minimum of $100
  • Annual fee: $25
  • One-Time Fees: $9 administrative fee when you open a Credit Builder Account
  • Credit score needed: no credit check
  • Other features:
    • You need an open Credit Builder Account and meet their requirements
    • You decide how much you use as your security deposit, which is your credit limit
    • Reports to the main credit bureaus

First Access Visa Credit Card

First Access Visa Card

Best for beginners

  • Intro APR: N/A
  • Regular APR: 35.99% (variable)
  • Annual fee: $75 the first year, $48 after
  • Monthly fee: $0 the first year, $8.25 after
  • One-time fees: $95 program fee to open your account
  • Credit score needed: for bad credit scores
  • Other features:
    • A credit line of at least $300
    • 1% cash back rewards on payments made to your First Access Credit Card

Credit One Bank Platinum Visa for Rebuilding Credit

Credit One Bank Platinum Visa for Rebuilding Credit

Best for rebuilding credit

  • Intro APR: none
  • Regular APR: 28.99% (variable)
  • Annual fee: $75 for the first year, $99 after
  • Credit score needed: for bad credit scores
  • Other features:
    • Up to 10% more cashback from some retailers
    • 1% cash back on eligible purchases
    • You can get a credit line increase if you use the card responsibly

*Terms may change without prior notice. **Conditions may apply to rewards and promotions.

Guide To Choosing And Applying For A Credit Card For Bad Credit

When Should You Get A Credit Card For Low Credit?

If Your Credit Score Is Between 300 And 600

A credit score below 600 often falls into the "bad credit" range. If you find yourself in this boat, know that credit cards for bad credit are tools to help you rebuild your credit. By making small purchases and paying them off in full each month, you can gradually boost that score and create a more positive credit history. But always be cautious – high-interest rates and fees often accompany these cards.

If You Have No Credit History

A credit card specifically designed for those with no credit history is a stepping stone, introducing you to the world of credit and setting the foundation for a healthier financial future. Just remember, it's not about splurging – it's about building. Use the card wisely, keep balances low, and pay them off promptly.

If You Have Any Preapproval Offers

Preapproval offers can be an indication that lenders see potential in you. It doesn't guarantee approval but suggests that you're on their radar. If these offers are for credit cards aimed at those with bad credit, it might be a sign that this is a route you could consider. Always do your research, and don't jump in without reading the fine print.

How To Choose A Credit Card For Low Credit

Understand Your Current Credit Situation

Obtain a copy of your credit report from major credit bureaus like Equifax, Experian, or TransUnion. They typically offer one free report a year. Dive into it, get to know the nitty-gritty, and see where you can improve.

Review The Interest Rates

While cards designed for bad credit tend to have higher interest rates, it's essential to hunt for one that doesn't go overboard. But that doesn't mean you have to settle for the first one you see. Shop around and compare. Find the best APR (Annual Percentage Rate) you can.

Seek Cards With Reporting Features

Look for cards that report to all three major credit bureaus. This ensures that with timely payments, you're well on your way to giving your credit score that much-needed boost.

Beware Of The "Too-Good-To-Be-True" Offers

If a deal sounds too sweet, take a moment. Read the fine print. Some cards might lure you in with promises but hit you with hidden fees later on.

Avoid Hidden Fee Traps

Some cards might tempt you with certain features but hide behind hefty annual or setup fees. Always read the fine print and weigh the costs against the benefits.

Think About Secured Options

If traditional cards keep eluding you, consider a secured credit card. By putting down a deposit, which usually serves as your credit limit, you can gradually pave the way for better credit.

Things To Avoid When Choosing A Credit Card For Bad Credit

Excessive Fees

Watch out for:
  • High Annual Fees. Sometimes, they're justified by perks, but they often drain your pocket.
  • Setup Or Processing Fees. They're often charged before you even get the card, eating into your initial credit limit.
  • Monthly Maintenance Fees. Some cards, especially those targeting those with bad credit, might slap on this charge. Over time, they can add up!

Confusing And Unclear Products

Transparency is king. When choosing a credit card, ensure you understand the terms, conditions, and every little detail in between. Avoid cards that:
  • Complex Fee Structures. If you can't figure out when and why you have to pay, steer clear.
  • Vague Benefits. "Enhanced credit protection" or "premium financial tools" sound fancy, but what do they mean? Make sure benefits aren't just buzzwords.
  • Complex Repayment Terms. Your goal is to build credit, not get tangled in a web of repayment confusion.

Very Low Credit Limits

While cards for low credit might naturally offer lower limits, be wary of those that offer credit lines so minimal that they're barely usable: This can make it challenging to keep your credit utilization rate (the percentage of your total available credit that you're using) in the recommended range of under 30%. For instance, with a $100 limit, even a $40 purchase can hurt your credit utilization rate.

Credit Repair Scams

There are products and services out there masquerading as quick fixes to your credit woes. Avoid any card or service promising to "erase" bad credit or drastically elevate your score overnight. Remember, there's no shortcut to building credit; it's a steady climb, not a sprint. Ensure that reputable institutions back the product, and always do your homework by reading reviews and checking with organizations like the Better Business Bureau.

Most Common Credit Card Requirements

Of course, all banks or financial institutions have unique requirements, but here are the general ones:
  • Age. Most credit card companies require applicants to be at least 18 years old. If you're younger and eager to start building credit, some issuers might consider you with a co-signer or if you show proof of independent income.
  • Identification. This means having valid photo identification documents. Typically, this also includes a Social Security Number (SSN) or, for non-citizens, an Individual Taxpayer Identification Number (ITIN).
  • Employment And Income. You must show proof of employment and consistent income to assure the credit card issuer that you can repay any money you spend. If you're not working, issuers can consider other sources of regular income, like social security benefits or alimony.
  • Credit History. Even cards tailored for those with bad credit will examine your credit history. They're keen to see how you've managed past credit obligations.
  • Current Debts. Owing money elsewhere doesn't necessarily mean you'll receive a denial, but issuers will consider your debt-to-income ratio. This metric helps them gauge if you can handle more credit.
  • Bank Account. Some credit cards, especially secured ones, might require you to have a bank account. Issuers use it for security deposits or setting up direct debits for repayments.
  • Refundable Security Deposit. This is only relevant for secured credit cards. A security deposit acts as collateral. The amount you deposit often determines your credit limit. Over time, with responsible card use, you might get this deposit back and transition to an unsecured card.

How To Apply For A Credit Card With Bad Credit

  1. Research Suitable Cards. Dive into researching cards specifically designed for those with bad credit. These cards often have features tailored to help you rebuild and reestablish your credit.
  2. Check For Prequalification. Some card issuers offer online tools that allow you to see if you prequalify for their products without a hard pull on your credit. While it doesn't imply guaranteed approval, it's a good sign and can guide your application choices.
  3. Complete The application. When you decide to apply, fill out the application thoroughly and truthfully. Incomplete or incorrect information can lead to a decline.
  4. Stay Patient And Persistent. Remember, building or rebuilding credit is a journey, not a sprint. If you face a rejection, don't lose heart. Review the reason, take steps to address the issues, and try again after some time.

How To Get Approved: Tips To Improve Your Chances Of Approval

  • Improve Your Credit Before Applying. Taking measures to boost your credit score before diving into the application process can work wonders.
    • Regularly check your credit report for errors. Something as simple as a misreported late payment can drag down your score.
    • Settle outstanding debts, even if it means negotiating a reduced payoff amount with creditors.
    • Become an authorized user on a trusted person's account. This way, their positive payment history can rub off on your report.
  • Reduce Outstanding Debt. Credit card issuers often evaluate your debt-to-income ratio. By reducing your existing debt, you present yourself as a less risky borrower. This doesn't mean zeroing out every account but showing you're actively working on it.
  • Steady Your Employment. Consistency is key. If you've hopped around jobs, try to stay put for a while. A steady employment history indicates stability, which lenders love.
  • Open A Savings Account. While it might seem unrelated, having a savings account can show issuers you're financially responsible. Even if you start small, it's a positive step.
  • Limit Recent Credit Inquiries. Each time you apply for credit, there's a hard pull on your report. Multiple inquiries in a short time frame can ring alarm bells for lenders. So, space out those applications.
  • Consider A Co-Signer. If you're struggling to get approved, consider having someone with better credit co-sign your application. They essentially vouch for your creditworthiness. Remember, this ties them to your financial decisions, so tread carefully.
  • Showcase Non-Credit Financial Responsibility. Sometimes, you might have the opportunity to share other financial data, like timely rent or utility payments, which might not typically appear on credit reports. These can paint you in a favorable light.
  • Address Past Financial Hiccups. If there's a specific reason your credit took a hit, like medical expenses or job loss, some credit card applications provide a space to explain. Giving context can sometimes sway decisions.

The Basics Of Credit Cards For Low Credit

What Is A Credit Card For Bad Credit?

A credit card for low credit, often known as a subprime credit card, is a tool specifically tailored for individuals with low credit scores (usually less than 600). These cards provide an opportunity for those with past financial missteps or thin credit histories to either build or rebuild their credit. With these cards, you get the chance to demonstrate responsible credit usage, slowly improving your score over time. They often include monthly credit score tracking, financial education resources, and credit-building programs.

Pros And Cons Of Credit Cards For Low Credit

Pros:
  • Opportunity To Build Credit. With regular, responsible use (think timely payments and low credit utilization), you can see improvements in your score over time.
  • Secured Options Available. For those wary of high-interest rates, secured credit cards offer a way in because they have lower fees or interest rates.
  • Approval Odds. Given their target demographic, these cards often have more lenient approval requirements, making them accessible to a broader audience.
Cons:
  • Higher Fees And Interest. These cards often come with steeper annual fees, setup fees, and interest rates. Why? Lenders view those with bad credit as riskier.
  • Lower Credit Limits. Initially, you might find yourself with a low credit limit, making it crucial to manage your spending to maintain a healthy credit utilization rate.
  • Less Perks. If you want to receive tons of rewards, cashback, or travel miles, you might need to temper your expectations. These cards are for building credit rather than offering high-end perks.
  • Potential For Debt. With higher interest rates, you risk accruing significant debt if you're not careful. Always aim to pay off your balance in full each month to avoid spiraling interest.

When And How You Should Use A Credit Card For Bad Credit

Whether you've just received your new card or are contemplating applying, here's a roadmap for when and how to use one:
  • Regular Small Purchases. Use your card for day-to-day small expenses like groceries or gas. This helps you stay active and build a credit history, but paying off the balance in full every month is vital.
  • Digital Transactions. In our increasingly digital age, having a credit card can simplify online purchases, reservations, or subscriptions.
  • Emergency Expenses. Life has its curveballs. These cards can be a safety net for unexpected costs. However, pay back the spent amount promptly to avoid interest accrual.
  • Building or Rebuilding Your Credit. Use the card responsibly to show lenders that past mistakes don't define your financial future.
Remember, the key lies in responsible usage: paying your bills on time, keeping the balance low, and not seeing your card as free money but rather as a tool to forge a better financial path.

Secured vs. Unsecured Credit Cards

Secured Credit Cards

  • Deposit Required. You'll need to put down a security deposit to get a secured card. This amount usually determines your credit limit.
  • Lower Fees And Interest. Since the deposit acts as collateral, these cards often come with lower annual fees and interest rates.
  • Credit Building. Most secured card issuers report to the major credit bureaus, making them effective for credit building.
  • Transition Potential. After demonstrating responsible use over time, many issuers may offer you the chance to upgrade to an unsecured card, returning your deposit.

Unsecured Credit Cards

  • No Deposit Needed. You won't need to put any money down upfront, lowering the entry barrier.
  • Higher Costs. Without collateral, these cards typically come with steeper interest rates and fees. Lenders see them as riskier.
  • Credit Limits. Initial credit limits might be lower, but with responsible use, you might be eligible for increases over time.
  • Varied Approval Odds. Some unsecured cards for low credit might have more stringent approval requirements, while others might be more lenient.

Should You Get A Secured Or Unsecured Credit Card?

When to consider a secured card:
  • If you're new to credit or have a low credit score.
  • If you've faced multiple rejections for unsecured cards.
  • If you want a tool primarily for credit-building rather than everyday spending.
When to consider an unsecured card:
  • If you have a fair to excellent credit score.
  • If you want to take advantage of rewards and perks.
  • If you don't want to pay a deposit or can't afford one.
Ultimately, your decision should be based on your current financial situation, credit goals, and spending habits. If you're looking to establish or rebuild your credit, a secured card might be a good stepping stone. Once you've improved your score, you can transition to an unsecured card with better benefits.

What to Do if You're Denied for a Credit Card

Denial isn't the end of the road, and here's a game plan to tackle it:
  1. Understand The Reasons. Under the Fair Credit Reporting Act, issuers must provide reasons for denial. Whether it's high debt, low income, or a spotty employment record, understanding the "why" is the first step to rectifying the issue.
  2. Call For Reconnaissance. Some credit card companies have a "reconsideration line" you can call to discuss your application. If you believe there was an oversight or have additional information that could sway their decision, this is your chance to plead your case.
  3. Review Your Credit Report. Errors on your credit report could be behind the denial. Obtain a free copy, comb through it, and dispute any discrepancies.
  4. Reduce Debt And Improve Your Finances. Work on bolstering your financial standing. This might mean paying down outstanding balances, seeking stable employment, or diversifying your credit mix.
  5. Consider A Different Card. If one door closes, another might just be waiting for you. Consider applying for a card that aligns better with your current credit status, like a secured card or one with more lenient requirements.

How To Prequalify For A Credit Card With Bad Credit

Prequalification can give you a glimpse into your chances of approval without impacting your credit score because it's based on a soft inquiry. Here's how you can prequalify:
  • Online Tools. Many credit card issuers offer online prequalification tools. By entering basic personal information, these tools give a preliminary assessment of your fit for specific card offers.
  • Visit A Local Bank Branch. Your relationship with a bank can be valuable. Schedule a visit to your local branch and speak with a representative. They can often give insights into available card options based on your account history and financial standing.
  • Credit Card Matchmaking Platforms. Various online platforms match users with potential credit card offers. By entering some details, these platforms can present you with a list of cards you might prequalify for.
  • Financial Advisors or Credit Counselors. Professionals who understand the financial industry can guide you toward credit card issuers that align with your financial profile. Plus, they can offer tips on how to improve your creditworthiness for future applications.
  • Specialized Prequalification Mailers. Keep an eye on your mail. Sometimes, credit card companies send out prequalified offers based on your credit profile from the major credit bureaus. These mailers indicate that they've shortlisted you for specific offers.
Remember, prequalification doesn't assure card approval. It's a litmus test of sorts. The actual application might involve more in-depth scrutiny.

Quick Guide To Bad Credit Scores

What Is A Bad Credit Score?

Your credit score is like a financial report card, providing lenders with a snapshot of your creditworthiness. This score typically ranges between 300 and 850. It's dependent on your credit history, which appears on your credit reports. Here's how the scale generally breaks down:
  • Excellent: 750 and above
  • Good: 700-749
  • Fair: 650-699
  • Poor: 600-649
  • Bad: 599 and below
If your score is below 600, it's usually considered 'bad.' However, bear in mind this isn't a permanent label. With the proper steps and financial discipline, you can improve it over time.

What Causes Bad Credit?

Identifying and addressing these factors can be instrumental in improving your credit score and cultivating better financial habits.
  • Late Payments. One of the biggest influences on your credit score is your payment history. If you've been tardy on repaying loans or credit card bills, this can have a significant adverse effect.
  • High Credit Utilization. Maxing out your credit cards? This shows lenders you might be living beyond your means. A high credit utilization rate (i.e., the ratio of your credit card balances to their limits) can ding your score.
  • Frequent Credit Inquiries. Applying for numerous loans or credit cards in a short span can raise red flags. Each application results in a hard inquiry, which can temporarily lower your score.
  • Defaults and Bankruptcies. More severe financial missteps like defaulting on a loan or declaring bankruptcy can have a profound negative impact, often lingering on your credit report for several years.
  • Short Credit History. If you're new to credit, there isn't much data for lenders to evaluate. While this doesn't necessarily translate to bad credit, it can lead to a lower score because of its uncertainty.
  • Errors On Your Credit Report. Mistakes can happen. Whether it's an incorrectly reported late payment or an account that doesn't belong to you, errors can unjustly lower your score.

How To Build Your Credit Score With A Credit Card

  • Choose Wisely. Start with a credit card designed for people with bad credit. Often, secured credit cards (where you deposit a certain amount as collateral) are easier to get approved for and can be a stepping stone.
  • Maintain Low Utilization. Always be mindful of your credit utilization rate. Aim to use less than 30% of your available credit. If you have a $500 credit limit, try not to carry a balance of more than $150.
  • Pay On Time. Regular, on-time payments signal to credit bureaus that you're a responsible borrower, positively impacting your credit score.
  • Automate Payments. Consider setting up automatic payments for at least the minimum due each month to ensure you never miss a payment. Just make sure to review your statements for errors or fraudulent activity.

How To Build Credit Without A Credit Card

  • Diversify Over Time. Consider diversifying your credit types—like a mix of credit cards, retail accounts, installment loans, etc. This showcases your ability to manage different types of credit.
  • Credit-builder Loans. Some credit unions and banks offer these loans specifically designed for those looking to enhance their credit score. You 'borrow' a set amount, but you don't get access to those funds until after you've made all the scheduled payments.
  • Report Rent and Utilities. Some services allow you to report your monthly rent and utility payments to credit bureaus. Consistent, on-time payments can help build your credit history.
  • Secured Loans. This is where you borrow against an asset you own, like a car. The lender has the asset as collateral, making it less risky for them and easier for you to get approved.
  • Become An Authorized User. If someone you trust has a good credit history, they can add you as an authorized user to their account. This means you'll benefit from their good habits, but remember, it's a two-way street. Any negative activities can impact both of you.
  • Peer-To-Peer Loans. Some platforms allow you to borrow from individuals instead of banks. These lenders report to credit bureaus, helping you build credit as you repay.
  • Monitor Your Progress. Regularly check your credit report for any inaccuracies or discrepancies. Several online platforms offer free credit reports and score tracking.
  • Always Pay All Your Bills On Time.
  • Longevity Counts. The longer your accounts stay open and in good standing, the better it is for your credit history. If you have already paid your credit line in full, don't close it (unless absolutely necessary), keep it open and unused.

Is There An Alternative to Access Business Capital?

A credit card is not the only funding option for entrepreneurs with bad credit. Small business loans are a great alternative.
Unlike cards, a business loan can offer you much more cash, which translates into many more investments. This will allow you to grow your business while improving your credit history.
In addition, with a card, you do not receive cash; you can only use it to make certain purchases. With a loan, you receive money in your bank account to use as you want (as long as the lender allows the expenses). And if we're talking about the business lenders, we need to talk about Camino Financial. We have a minimum credit score requirement of 670, which is lower than most lender's requirements. Just remember that a solid credit history will allow you to be eligible for lower interest rates.
  • We offer fixed monthly payments, so you know exactly what you owe every month and are in control of your finances.
  • There are no hidden costs.
  • We offer unsecured loans: you don't need to put up collateral
Apply For A Business Loan!

FAQs

What is the easiest credit card to get with bad credit?

OpenSky Secured Visa Credit Card may be one of the best options since it doesn't perform a credit check.

Can I get a loan if I don't have a credit score?

Yes! But you must be very careful with what type of lender you apply with. For example, Merchant Cash Advances (MCAs) or payday loans might not require you to have a good credit score but are VERY expensive.
 
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