How to apply for a credit card with bad credit

By Izzy M
Modified on April 26, 2023
how to apply for a credit card with bad credit

A credit card is a valuable financial tool that helps consumers afford high-cost transactions. But what if you don’t have a positive credit history? Are there credit card options for bad credit? 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. 

The major credit bureaus, TransUnion, Equifax, and Experian, each provide 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. 

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. 

Applying for a secured credit card does not require a credit check. Credit checks further decrease your score, so you should limit your credit inquiries. Some financial institutions will charge a monthly or annual fee for secured cards. Still, you can easily find options that require no additional fees.

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. 

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. 

Once you have improved your credit score, you can get your refundable security deposit back or request a statement credit. 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 online quick cash 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.

The Bottom Line

Ideally, you should not apply for a new credit card until you manage to improve your bad credit score. Once your credit is higher, you can qualify for a higher credit limit and lower interest rates.  

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. 

Paying on time over a long period can improve the way lenders view your credit history. Payment history accounts for 35% of a FICO score calculation. Keep track of your due dates and expenses to ensure you never miss a payment. Many companies offer automatic payments, so you never have to worry about late fees or dings to your credit. 

When Should I Apply for Another Credit Card?
How to Apply for a Credit Card With Bad Credit

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