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How to apply for a credit card with bad credit

how to apply for a credit card with bad credit

You can apply for a credit card with bad credit by finding a lender that has a low minimum credit score requirement and submitting a credit application. There are credit cards for bad credit, but it’s up to you to compare interest rates and terms to get the best credit card for your financial needs.

If you have bad credit, rest easy knowing you are not alone. About 108 million consumers have a low or no credit score.1 The good news is that there are still plenty of bad credit loans and steps you can take to build good credit.

Keep reading to learn about your financial options and what steps you can take to improve your bad credit score. 

How To Check Your Credit Score 

Before applying for credit cards, it’s a good idea to check your current credit score. Knowing your current FICO score can help you better understand your financial position. There are various ways to check your credit score and view your credit report. 

If you already have a credit card, you may be able to check your credit score for free. Many credit card issuers provide free FICO scores to consumers online. Just log into your online account through a computer or mobile app. You can also view your credit score by requesting your credit report from one of the three major credit bureaus. 

These are the major credit bureaus:

Each credit bureau provides one free annual credit report to consumers. If you request one credit report every four months, you can keep tabs on your credit history and credit score throughout the year for free. 

What Factors Affect Credit Scores?

There are five factors that directly affect credit scores. If you have poor credit, you should know what these factors are and how much they can affect your credit rating. Increasing your knowledge of credit can help you improve your score. A higher credit score could help you get more loan options, lower interest rates, extended repayment plans, and more!

Factors Affecting CreditPercentage Impact on Credit ScoreHow to Improve
Payment History35%– Always pay bills on time.
– Set up automatic payments or reminders.
– Address any missed payments immediately.
Credit Utilization30%– Keep credit card balances low.
– Pay off debt rather than moving it around.
– Avoid maxing out credit cards.
Length of Credit History15%– Avoid closing old accounts as they contribute to your credit history.
– Keep a mix of old and new credit accounts.
New Credit10%– Limit the number of credit inquiries and new accounts opened in a short period.
– When shopping for a loan, do it within a short timeframe to minimize impact.
Credit Mix10%– Have a mix of credit types (e.g., credit cards, retail accounts, installment loans).
– However, don’t open accounts you don’t intend to use.

Are There Credit Cards for Bad Credit?

If you currently have poor credit, you may struggle to obtain a new unsecured credit card. Credit scores are the most important qualifying factor for credit card companies. So if you have a bad credit score, you may not get approval for a credit card with a higher credit line.

Prepaid and Debit Cards 

You may have heard about prepaid cards as an alternative credit card option. A prepaid card works similarly to a debit card. You can only spend the money you have. A debit card uses money in your bank account, but you must load cash onto the prepaid card. Most major credit card companies offer prepaid cards. 

Unfortunately, a prepaid or debit card cannot help you improve your low credit score. Your financial information is not reported to the three major credit bureaus. If you’re looking for credit cards for bad credit, consider applying for a secured credit card! Secured credit cards are easier to get than unsecured credit cards, and they can help you improve your credit over time. 

Secured Credit Cards

A secured credit card is similar to both debit and credit cards. This financial tool benefits people who are new to credit or have a bad credit score. 

  • No credit check required for application.
  • Some institutions might charge fees, but fee-free options are available.
  • Requires a refundable security deposit for activation.
  • Functions like a traditional credit card with monthly bills.

Security Deposit 

A secured credit card requires a refundable security deposit for activation. The security deposit equals your available credit line. If you provide $500 to a creditor, your available credit equals that amount. Most credit card issuers have a minimum security deposit requirement. You may have fewer options if you only have a few hundred dollars to spare. 

Once you no longer want the secured credit card, you can get your refundable security deposit back or request a statement credit. 

Boost for Credit Scores

A secured card works just like a credit card. Some secured credit card options offer rewards, but most offer basic financial features like online banking. When you spend money using your secured credit card, you will receive bills like a traditional credit card. You will hurt your credit score if you do not make on-time payments. Payment history is one of the most critical factors for calculating a credit score, so ensure you don’t miss a monthly payment. 

Talk with your credit card issuer and inform them you want to close your account if you want a refund. Remember that your balance needs to be zero before an account can be closed. You may get pre-approved for an unsecured credit card if you have an excellent payment history. 

When Should I Apply for a New Credit Card?

Is there ever a good time to apply for a new credit card? Financial experts suggest holding off on inquiring about a new unsecured credit card unless your finances improve. However, applying for a new credit limit may be ideal if there is a promotional period. 

These are a few situations that may warrant a new credit card:

Credit History Has Improved

Suppose you have been actively working on improving your credit history. In that case, applying for a new credit card may be a good idea. A higher credit card can make it easier for consumers to get lower interest rates, a higher credit limit, and premium benefits. You may be able to secure a reward card that offers cash back rewards or points. Credit card rewards can help you get free money or gift cards to spend on your favorite restaurants and stores. 

Promotional Offer

If you need money to finance a large purchase, such as a new couch, applying for a new credit card may be beneficial. Many credit card issuers offer a zero-interest introductory period for new applicants. This type of promotion means you do not have to pay interest on purchases for the first few months. Remember that zero-interest offers are only ideal if you can pay off the credit card balance before the promotional period ends. Often, the interest rate skyrockets after the promotional period. 

You Have a Successful Budget Plan

There are various creative ways to save money. If you successfully follow a budget plan and your debt is under control, opening a new credit line may not disrupt your finances. Budgeting correctly means you have enough money to pay for necessities, afford frivolous expenses, and save money. Consumers should only open a new credit line if they can manage their credit responsibly and avoid spending beyond their means. 

Can Credit Repair Companies Improve My Credit?

You may have researched fast ways to get good credit if you have a bad credit score. You may have seen ads for various credit repair companies. A credit repair company, also known as a credit services organization, offers personalized consumer help in exchange for payment. 

When you hire a credit repair company, they will work to get negative information removed from your credit report. Negative information can hurt your ability to qualify for quick cash loans, unsecured loans, and unsecured credit cards. However, you can remove inaccurate negative information yourself. So hiring a credit repair company may be a waste of money. 

If there is an error on your credit report, you can file a dispute with the credit reporting company. Filing a dispute can be done by completing an online form or mailing a letter of dispute. If you opt to file through the mail, ensure you request a return receipt. Keep in mind that a credit reporting agency will not remove accurate negative information. 

Frequently Asked Questions About Cards for Bad Credit

What is the difference between secured and unsecured credit cards?

Secured credit cards require a refundable security deposit, which typically determines your credit limit. Unsecured credit cards, on the other hand, don’t require a deposit and offer a credit line based on your creditworthiness.

How do the three major credit bureaus impact my ability to get a card for bad credit?

The three major credit bureaus – TransUnion, Equifax, and Experian – maintain your credit reports. Lenders often check these reports to assess your creditworthiness. A negative report can make it challenging to get cards for bad credit.

Can I upgrade from a secured credit card to an unsecured credit card in the future?

Yes, many issuers offer an upgrade path from a secured credit card to an unsecured credit card once you demonstrate responsible credit behavior over time.

How does a refundable security deposit work with secured credit cards?

The deposit acts as collateral for the lender. If you default on your payments, the lender can use the deposit to cover the owed amount. If you close the account in good standing or upgrade to an unsecured card, the deposit is returned.

Are there any unsecured credit cards specifically designed for individuals with bad credit?

Yes, there are unsecured credit cards tailored for those with bad credit, but they often come with higher interest rates and fees compared to standard cards.

How often do major credit bureaus update credit scores?

The three major credit bureaus update credit scores typically every 30 days, but the exact frequency can vary based on the information provided by lenders.

Is there a difference between a platinum secured credit card and other secured credit cards?

A platinum secured credit card might offer additional benefits or features compared to standard secured cards, such as lower interest rates or reward programs. However, the primary function, which is to help build or repair credit, remains the same.

How can I increase my credit limit on a card for bad credit?

Over time, with responsible credit behavior, you can request a credit limit increase. Some issuers might also offer automatic credit line increases after a certain period of responsible use.

Do all secured credit cards report to the major credit bureaus?

Most secured credit cards report to the three major credit bureaus. However, it’s essential to confirm this with the card issuer to ensure your positive credit behavior is being reported.

If I have funds in my bank account, can it positively influence my chances of getting a credit card for bad credit?

While having funds in your bank account can demonstrate financial stability, credit card approvals are primarily based on your credit report and score. However, a healthy bank account can be beneficial for secured cards, where a deposit is required.

CreditNinja: Final Thoughts on Credit Cards for Bad Credit 

You can try applying for a secured credit card if you want to improve a bad credit score. Creditors report your secured credit payment information to credit reporting agencies. You may not have to wait long to get good credit if you have developed good financial skills. 

But while secured credit cards can help you build credit over time, they do not provide emergency funds. And if you have bad credit, it may be challenging to get an unsecured credit card. If you need a $2500 loan, consider applying for a CreditNinja personal loan

CreditNinja offers exclusive perks, such as competitive rates, top tier customer service, and flexible payment plans. We consider more than your credit score for loan approval, so inquire today to see if you’re eligible! 

References:

  1. Millions of Americans ‘are stuck in a Catch-22’ │ Yahoo Money
  2. When Should I Apply for Another Credit Card? │ Experian
  3. How to Apply for a Credit Card With Bad Credit │ Experian
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