Are you looking for a credit card but worried you can't get one because you have a bad credit score? Fortunately, it's possible to get a one even when you have poor or bad credit. Doing so can actually improve your credit score. Just make sure you get one of the best credit cards for bad credit.
I’ve analyzed dozens of offers and found the best credit cards for bad credit scores to help you get on the right track. Personally, I've had over a 800 credit score since 2008, so I know what I'm looking for when it comes to best credit cards for bad credit.
Frankly, there are many terrible credit cards out there that shouldn’t be in existence. Don’t waste your time with those.
Instead, focus on the two highlighted below.
- Capital One Secured MasterCard
- OpenSky Secured Visa
Before we dive into the great features of these two cards, let's make sure you're familiar with the causes and challenges of bad credit. I'll also explain how to get approved for a new credit card when you have a bad credit score.
What Causes A Bad Credit Score?
Lenders and banks use the FICO scale to assess your credit rating. The scale ranges from 300–850. There are several factors that influence your FICO score such as credit utilization, payment history, total debt owed, credit mix, and length of credit history.
If you have bad credit, your credit score is below 670, which is then split out between fair (580-669) and poor (300-579). Some of the most common causes of bad credit you should be aware of are below.
- No or limited credit history
- Not paying bills on time or missing payments
- High balances on unpaid loans
- Too many hard inquiries, ie applied and opened too many accounts
- Errors on your credit report that haven't been caught or resolved
Challenges Of Bad Credit
Having bad credit can affect some of the most important financial transactions in your life. One of the most common issues people with bad credit scores face is difficulty in getting new credit cards.
It can also be hard, if not impossible, to get a loan to buy a new house, to fund a business investment, or to buy a car. A bad credit score can also affect your ability to get affordable insurance and a job.
Those who do manage to get access to credit are subject to high interest rates, which can very costly without responsible use.
How A Card Can Improve Your Score
If you have a bad credit score, having a credit card can actually be a good thing if you don't get carried away. Here are a few key reasons why credit cards can improve your credit score:
- Paying your bills on time can help improve your score. Helpful tip: set up auto pays.
- Most credit cards will report your spending and payments to the 3 major credit bureaus.
- Responsible usage can help you re-establish your credit history.
- Consolidate multiple high interest rate card balances with the best 0% APR balance transfer credit cards to save on interest and simplify payments.
- On-time payments increases your access to rewards, which can help you pay down debt faster.
How To Get Approved For A Credit Card
If you have a bad credit score and want to get approved for a credit card, the type of card you apply for makes a big difference. Many rewards credit cards are designed specifically for consumers with good to excellent credit scores.
If you apply to one of those cards with bad credit, you'll not only get rejected from the card, you may wind up hurting your credit score even more. Instead, apply for cards that are specifically made for people with bad, limited, or no credit. See our detailed recommendations below.
Applying for a credit card with a co-signer who has good credit can also help you get access to a credit card. Or you could apply for a secured account. Secured cards require a cash deposit that typically determines your available credit limit.
Best Credit Cards for Bad Credit
Here are the top two best credit cards for bad credit offered by reputable issuers.
- Capital One Secured MasterCard
- OpenSky Secured Visa Credit Card
Capital One Secured MasterCard
The Capital One Secured MasterCard is like a build-your-own credit system. The card starts you out with a $200 line of credit after making a refundable security deposit of $49, $99, or $200.
This card is ideal for those with bad credit who need to establish or rebuild their credit history and improve their current credit rating.
Capital One Secured MasterCard's additional offerings include:
- Accepted at millions of locations around the word.
- Access a higher line of credit after 6 months of on-time payments with no additional deposits required.
- No annual fees.
- You can pick your own due date so that it doesn’t coincide with other payment deadlines.
- Reports all payments and spending to all 3 three major credit bureaus.
- Manage your account easily via mobile app, online, or by phone.
OpenSky Secured Visa Credit Card
OpenSky is similar to the Capital One Secured Mastercard, but the deposit fee starts at $200.
What's great about the OpenSky Secured Visa card is there's no credit check, you're in control of your credit line, and you can apply in under five minutes.
More features of the OpenSky Secured Visa Credit Card:
- Does not require a credit check to apply.
- Set your own credit limit with a minimum refundable deposit of $200.
- It has a fixed low annual fee of $35.
- Helps build credit fast; reports your spending and payments to all 3 major credit bureaus.
- Provides credit tips on their website for better credit and spending habits.
- 99% of customers who join with no credit establish a credit score as quickly as 6 months.
Takeaways On The Best Credit Cards For Bad Credit
These four best credit cards for bad credit scores are designed to help you work towards improving your credit score while enjoying the best benefits possible. Now that you have some great options, don't forget it’s up to you to get responsible with your finances and starting building your credit back.
Once you start rebuilding your credit history and improve your credit score, your access to credit will greatly improve. Then you can expand your search to the top cards out there today and enjoy maximum rewards benefits.
Pay off Your Debt Faster With A Personal Loan
If you don’t have enough cash, getting a personal loan from Credible is a good place to start. If you have expensive credit card debt, consider consolidating your debt into a lower interest-rate personal loan.
Credible has the most comprehensive marketplace for personal loans. Lenders compete for your business so you can get the best rate. Get personalized prequalified personal loan rates in just two minutes after you fill out an application.
Prequalified rates are based on the information you provide and a soft credit inquiry. Receiving prequalified rates does not guarantee that the Lender will extend you an offer of credit. You are not yet approved for a loan or a specific rate. All credit decisions, including loan approval, if any, are determined by Lenders, in their sole discretion. Rates and terms are subject to change without notice. Rates from Lenders may differ from prequalified rates due to factors which may include, but are not limited to: (i) changes in your personal credit circumstances; (ii) additional information in your hard credit pull and/or additional information you provide (or are unable to provide) to the Lender during the underwriting process; and/or (iii) changes in APRs (e.g., an increase in the rate index between the time of prequalification and the time of application or loan closing. (Or, if the loan option is a variable rate loan, then the interest rate index used to set the APR is subject to increases or decreases at any time). Lenders reserve the right to change or withdraw the prequalified rates at any time.
For further suggestions on saving money and growing wealth, check out my Top Financial Products page and the Ranking Debt Types post.
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About the Author:
Sam worked in investment banking for 13 years at Goldman Sachs and Credit Suisse. He received his undergraduate degree in Economics from The College of William & Mary and got his MBA from UC Berkeley. In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $250,000 a year in passive income. His main passive income focus is on real estate crowdfunding to take advantage of cheaper valuations and higher cap rates in the heartland. He spends time playing tennis and taking care of his family.
Financial Samurai was started in 2009 and is one of the most trusted personal finance sites on the web with over 1.5 million pageviews a month.
Disclosure: Credible Operations, Inc. NMLS# 1681276, “Credible.” Not available in all states. www.nmlsconsumeraccess.org.