The possibilities are endless when you have a pristine credit score on your report. But for many Americans, a low credit score is the norm. This limits options when it comes time to choose a credit card. For some, the wrong credit card, or misusing that almighty rectangle of plastic was what brought their credit score so low in the first place, so it seems counterintuitive to apply for another credit card.
But what many don’t know is that the right credit card used carefully can actually improve your credit score, and give you a more positive financial history. The problem is; people with low credit scores don’t qualify for many types of credit cards, and the ones that they do qualify for seem scammy, offer very few rewards, and have an astronomically high interest rate attached to them.
That’s certainly not to say that all low credit score credit cards are low quality. Far from it. There are a variety of great low credit score credit card options out there for people with bad credit… so here’s how to get low credit score credit cards that are right for everyone:
Know How To Apply for a Credit Card When You Have a Low Credit Score
The financial world just works a little differently for those with a low credit score, as you may already unfortunately know. It adds an extra set of hoops to jump through, and pitfalls to avoid. The first of which is the application do’s and don’t’s of have a low credit score and trying to apply for a low credit score credit card.
It’s never a good idea to apply for multiple low credit score credit cards at once. It damages your credit score even further when third parties do those “hard checks” on your credit score reports, such as landlords, rental providers, banks, etc. So every time a credit card provider checks your credit score to see if you qualify, your credit score takes another hit. Avoid unnecessary hard checks from third parties… apply to just one credit card provider that you’ve thoroughly researched, you’re happy with, and that you know you qualify for so you can avoid having to go through the process again and potentially do more harm to your low credit score.
Check Your Credit Score the Right Way
You will need to know just how bad your credit score actually is. You should be able to check your report for free. Remember- different credit bureaus will quote you at a different credit score number because they factor in different things and tally the results differently. Your credit score could look pretty good at Experian, but look absolutely terrible on your FICO. Just try to get a ballpark number, or know which credit report the credit card provider you’re applying with will reference.
If you have an extremely low credit score (think below 400-450 or so) then you’ll probably want to apply for a secured credit card. This will help you avoid being denied a standard credit card (again, keeping your credit score from being further lowered) and make the process a bit smoother. A secured credit card requires a cash deposit from you as a means to “secure” the line of credit they are providing.
A secured credit card is best obtained through a reputable bank. There are plenty that provide low credit score credit cards through a secured line of credit. You should always choose these well-established credit card providers over some online account or brand-name credit provider that caters to those with low credit scores.
Don’t Settle for an Inferior Credit Card- It Can Come Back to Haunt You
Those outside low credit score credit card providers almost always come with high fees, high interest rates, and poor terms. Don’t settle for a credit card that will just drive you further into a financial hole. Only choose a reputable source that offers you great terms, and interest-free grace period, etc. There’s no point in securing a low credit score credit card if it’s only going to make your credit score and your life worse!
You can find a low credit score credit card at a reputable bank with a low annual fee, or no annual fee. There are plenty of banks that offer an annual fee of $50 or less, so there’s no reason for you to settle for a lower quality credit card just because you have a lower credit score.
- Stick with a secured credit card from a reputable source.
- Manage that credit card account carefully and responsibly for at least one year.
- Then you can consider graduating to an unsecured card once your credit score is improved.
If you have an outstanding bankruptcies, you’ll need to make sure those are all fully discharged before applying for a low credit score credit card. You can’t get approved for any type of credit card (even a secured one) with bankruptcies still holding you back. Take care of those, and then you can consider applying for a line of credit.
How a Low Credit Score Credit Card Can Help Build Back Up Your Credit Score
The purpose of using a credit card to improve your credit score is only achieved through gaining positive credit history. So how do you do that?
- Pay your bills on time.
- Set automated monthly reminders for yourself from the bank or credit card provider so you know when your next payment is due.
- Use the credit card regularly, but never exceed your limit.
- Set up automatic withdrawal from a bank account specifically for paying off your credit card.
- Stay on top of any fees or interest that could accumulate.
Mostly… don’t let anything accumulate in the first place! Never miss a payment. Pay early. Do whatever you need to do to help you manage your credit score account. You should be using your card often enough, but never so much that you could accidentally go over your limit.
Tips for Maintaining Good Credit with a Low Credit Score Credit Card
Try using your credit card for a specific purpose instead of for everyday purchases that you don’t have the upfront cash for. For example: pay all your bills with your credit card, then pay off your credit card once or even twice a month. This way, you’ll be building good credit with your responsibly-maintained credit card without risking further damage by getting behind on payments or accidentally overusing the card.
The key to building good credit is maintaining a system that you can easily keep tabs on. Whether it’s automatic withdrawal to pay off your credit card payments, weekly reminders on your limit and upcoming bills, or a separate account specifically for your low credit score credit card… staying on top of your credit card will slowly but surely repair all that bad credit.
Paying all your bills on time will also keep that credit score shiny, so you won’t have to worry about getting denied a card in the future. If you’ve successfully used your secured low credit score credit card for at least one year, then you can consider applying for an unsecured credit card. But the longer that you diligently take care of this one line of credit, the better it’ll look in your credit history. Old positive accounts are always viewed more favorably than lots of new ones that you frequently close out.
“Which Low Credit Score Credit Card is Right For Me?”
A secure low credit score credit card is always your best bet if you have a very poor credit score. Luckily, most banks provide those. You’re going to get a better deal and the account will also be easier to manage if you apply for a secured line of credit with the bank that you already have an account at. Plus, you’ll already known that bank’s policies, and having an open account with them often grants you extra savings or rewards.
Here’s Credit Karma’s list of the best low credit score credit cards on the market right now, so if you see a card that your bank could provide you, it’s definitely worth looking into:
Different credit cards can do different things for you, no matter what your credit score is like. They all offer different advantages and disadvantages, so it’s best to know what you’re looking for in a low credit score credit card before you actually take the plunge and apply. Nerd Wallet is a handy blog that has compiled a list of 2015’s best low credit score credit cards, and lists what they can do to help you. There’s always a credit card out there that’s perfect for your individual financial situation, so keep looking until you find a great reputable, affordable low credit score credit card. Check out some of these: http://www.nerdwallet.com/blog/top-credit-cards/nerdwallets-best-credit-cards-for-bad-credit/
“What If I Just Have a Short Credit History?”
If you’re newer to the game, but don’t necessarily have a terrible credit score at this point, it can still be difficult to qualify for many types of credit cards. Lots of credit card providers want you to have an unattainably perfect credit score in addition to a thousand years of perfect credit history, with years of spotless financial records. That’s difficult to come by when you’re 20 and applying for your first credit card.
There are some solid options for low credit score credit cards for people with a short credit history, and an ok credit score. Nerd Wallet has compiled another list of good credit cards that can offer people rewards for making purchases that they often make anyway. It’s certainly something to look into if you have a relatively average credit score, but your short credit history could potentially get in the way. Try some of these: http://www.nerdwallet.com/blog/top-credit-cards/unsecured-credit-cards/
Beware of the Perks from Too-Good-To-Be-True Credit Card Providers
While it’s not usually a good idea to apply for a credit card just because the rewards look perfect for your spending habits (that’s how they’ll getcha!) there’s no harm in applying for a low credit score credit card that offers you some perks IF they also feature a low interest rate or preferably a no-interest grace period, plus a low annual fee or none whatsoever.
Too many rookies have made the mistake of taking out a credit card from a retail store that they frequently shop at, just because the rewards made it enticing; but then they got slapped with massive interest rates, sneaky fees, and lousy terms and conditions that dragged their credit score down to the deep dark depths of financial undesirability.
Is a Low Credit Score Credit Card the Right Solution for You?
Getting a low credit score credit card might not be the fix that you’re actually looking for. If you want a safe way to rebuild your credit score and develop a positive credit history, then you should absolutely go for it. A low credit score credit card is the perfect way to do that.
But if you’re really just in need of a short-term loan or emergency source of cash, you should look into some alternative loan options.
There are plenty that will qualify people with a low credit score, and you won’t have to pay it back as quickly as you would with a credit card. Here are some options for credit cards, and some extra things to consider before you apply at all: http://www.thesimpledollar.com/best-credit-cards-for-bad-credit/
Are you wanting to use it like a debit card? Try getting a prepaid debit card instead. You won’t have to deal with all the fees, and you’ll never accidentally go over your limit. Using a credit card the way it’s meant to is essential to avoid going into debt and re-damaging your credit score.
By using a low credit score credit the correct way for the right purpose, you can re-establish your credit score, build up good credit, and get in good standing with a reputable bank that could help you in the future. Start with a secured low credit score credit card, manage it carefully for the next year or so, and you’ll back on the right track.