Without a credit card, daily life can be a challenge. The good news is, there are ways that even those with very bad credit can get credit cards. We’ll show how below.
The first step is to know your credit score, because different credit scores will give a person access to different credit card offers. Next, look into cards with higher rates or fees, card offers that allow a cosigner or secured credit cards.
What’s My Credit Score?
A credit score is a three digit number, usually between 300 and 850, that provides a picture of a person’s likelihood to pay back borrowed money.
Saying a person has “bad credit” might mean anything from a score of 699 all the way down to 300. There are different levels of “bad,” and credit card options vary depending on a person’s specific credit score. Someone with a score of 450 will have to take a very different approach to getting a credit card than someone with a score in the 600s. Therefore, knowing your exact credit score is the best place to start when setting out to get a credit card.
Where Credit Scores Come From
Credit scores are made from information in a person’s credit report or credit history. Consumers can view their credit reports for free, once per year, by going to AnnualCreditReport.com. This is the only website approved by the US Government to distribute free credit reports to consumers.
When someone applies for a credit card, financial institutions do look at the person’s credit report. However, they also often examine the applicant’s credit score. Banks use credit scores to get a picture of a borrower’s repayment habits at a glance.
Though consumers can look at their credit reports for free one time per year, it has traditionally cost money to see a credit score.
The Truly Free Credit Score
Many banks now offer customers a peek at their credit score for free. Another free option is CreditKarma.com, the popular online service that lets users see their Equifax and TransUnion credit scores for free at any time they like.Once someone knows their credit score, they’ll have a better idea which credit card options are available to them.
Credit Score from 640 to 700: Fair Credit
Consumers in this group are considered “higher risk” by the banks. They’re better off than those in lower ranges, but financial institutions still take more care with them than with those whose scores are 700 or higher. People with credit scores in this range likely have some missed payments in their credit history. They may be overusing their credit, with one or more cards “maxed out.” They may even have had an account in collections in the past seven years. Banks still want to deal with those in the “fair credit” group, but they’ll do so warily.
Credit Card Options for Those with Fair Credit
Those with credit scores from 640 to 700 won’t have access to all the lowest interest cards. However, there are still a good selection of credit cards to choose from. Most credit cards in this range will carry higher interest rates, generally in the 20% to 25% range, with some exceptions. If you’re in this range of credit scores, shopping around a bit will really help you. Some credit cards open to those with fair credit include:
This card has a 24.9% interest rate and a $39 annual fee.
This card has a 24.99% interest rate, no annual fees, and cash back rewards.
This credit card has a 17.9%-23.9% variable interest rate and a $35-$99 annual fee.
This card has a 23.9% interest rate and a $35-$99 annual fee.
Credit Score from 580 to 640: Poor Credit
Banks consider those in this group “high risk.” To get a credit score in the 580-640 range, a consumer likely has at least one account in collections. Other factors are missed payments and maxed out card balances. Because the worst black marks stay on a credit history for seven years, scores in this range can hang around a long time. Financial institutions will tread very lightly when extending credit to people in this group. They’ll try to charge high interest rates to offset the risk that comes with lending money to those with poor credit.
Credit Card Options for Those with Poor Credit
Those with credit scores from 580 to 640 will have a much harder time finding a credit card. They can expect to pay higher interest rates in the 25% and up range. Cards open to people in this group may also carry higher fees and lower borrowing limits. Generally though, people with poor credit can still find credit card offers if they shop around a bit. Someone in this category who can’t get approved for even a high interest card still has hope by looking into the “secured card” options for those with very poor credit.
This card comes with free access to the owner’s credit score. The card’s credit limit can increase with responsible use.
This card lets the owner set their own credit limit based on whatever initial security deposit amount they choose.
The First Progress secured card lets users get their card faster with an expedited processing option.
The Primor Secured Card from First Choice bank has no application fees.
This card from USAA puts the applicant’s security deposit into a 2 year CD that earns interest in the background.
Credit Score Below 580: Very Poor Credit
These very high risk borrowers will almost certainly be denied for any traditional credit card. They may have no credit history at all. They may also have bankruptcies, accounts in collections, many missed payments and other worrying items in their credit reports. Banks won’t lend them money because they’ll have little faith in being repaid.
Credit Card Options for Those with Poor Credit
The loophole for those with scores below 580 is called a “secured credit card.” Secured cards don’t require the bank to risk losing their money, because they require a deposit up front. For example, Capital One’s Secured Master Card takes a minimum $200 deposit. Capital One holds that deposit and lets the card holder use the card to make purchases up to $200. If the card holder fails to pay back the money, Capital One keeps the deposit.
The customer can choose to pay a higher deposit to get a higher credit limit. The benefit of secured cards is that they rebuild a person’s credit history by letting them demonstrate responsible borrowing habits over time. Some secured cards can even have their credit limits raised without additional deposits if the card holder makes payments faithfully.
Those looking for secured credit cards can see our list above in the “poor credit” section.
Cosigners: The Back Door to Credit Cards for Those with Bad Credit
A few credit card companies, like Bank of America, Discover and Wells Fargo, allow a responsible person to co-sign for a credit card. A cosigner allows someone with bad credit to get a non-secured or lower interest rate card than they’d be able to get on their own. And even companies that don’t allow co-signers will sometimes let an existing card customer add a second party to their account.
Finding a co-signer or being added to someone else’s credit card account are both great ways for those with bad credit to obtain credit cards. However, both methods still require trust. In this case, it’s not the bank that needs to trust the card’s applicant, but the co-signer. In the event the card holder can’t pay back what they borrowed, the co-signer becomes responsible for the debt.
Bad Credit is Not the End
So for bad credit, remember these options:
- Credit Score 640-700: Higher-rates / Higher-fees. Shop around to get the best rate, then pay the balance off month-to-month to avoid racking up high interest charges.
- Credit Score 580-640: Fewer options / Highest rates / Highest fees. With these cards, it’s even more important to avoid interest by not carrying a balance.
- Credit Score Below 580: Secured cards. Pay in money up front and borrow against the balance to build up a good credit score.
- Other Option: Co-Signer to get a traditional credit card even with bad credit