Which Credit Cards Are Best for Bad Credit?
If you have bad credit, you may find you have a hard time getting a good credit card – or getting a new credit card at all. However, this is an avenue worth pursuing, as credit-building cards used wisely can help you improve credit scores and get more of the good things you want in life.
This post recaps the credit cards that many financial experts believe are best for bad credit and how to improve your credit score by making on-time and as-agreed payments. Selecting the right credit card for you is a positive first step towards the goal of improving your credit score.
What Is “Bad Credit”?
Before assuming you have bad credit, it’s a good idea to check your FICO credit scores. Each of the three major credit reporting agencies (CRAs) has a different scoring algorithm. Check all three to know where you stand and then take steps to improve your credit.
In general, your credit scores can range from 300 to 850. If you have bad credit, your scores probably range from 300 to 629. That means you’ll pay more for credit. You may be asked to pay additional fees, such as an annual cardholder fee, or pay higher charges for late payments. The lender assumes higher risk by lending to borrowers with bad credit.
Cost of Bad Credit
Lenders of all types are much less likely to extend credit to someone with bad credit. When searching for a credit card for bad credit, know that not all credit cards for bad credit are created equal.
Top Three Credit Cards for Bad Credit
Depending on your credit history, you may need to open a secured credit card account or qualify for an unsecured card. Here are three credit-building cards you should consider now.
Capital One Secured MasterCard
Although you'll be asked to provide Capital One with a security deposit to fund the initial credit line, Capital One's Secured MasterCard has many great features. There's no annual fee and, unlike many other secured credit card issuers, Credit One regularly reviews your account to offer credit line increases. You may be offered an increased credit line after just five months of making timely credit card payments. Other advantages include:
- After opening the Capital One Secured MasterCard, all three CRAs will receive a monthly report of your payment history.
- Depending on your current creditworthiness, the initial security deposit will be $49, $99, or $200.
- Capital One is a leading financial services company in the U.S. Your credit card statement is easy to read. It's simple to pay your bill electronically. There's no need to wait days or weeks for your payments to clear.
- Capital One offers free access to TransUnion's CreditWise app. There's no cost to check your TransUnion scores.
- As a Capital One customer, you can take advantage of a full menu of financial services if you so desire. It's possible to open an online checking/savings, CD deposit, retirement, and investment account at Capital One and keep track of your money online.
- As an established customer with improving credit, you can also apply for other loan products, such as a car loan.
Although Capital One Secured MasterCard's annual percentage rate (APR) is currently 26.99 percent, you can also improve your credit by paying the monthly balance in full.
Credit One Bank Platinum Visa with Cash Back Rewards
If you travel for business or use a credit card on a regular basis, the Credit One Bank Platinum Visa with Cash Back Rewards has many benefits. Unlike other credit card issuers, it's possible to check your prequalification for this card without generating a hard inquiry. Too many hard inquiries on your credit reports can depress credit scores.
Unlike the Capital One Secured MasterCard, you don't fund the Platinum Visa with a security deposit. Credit One Bank requires an annual fee of $0 to $99, depending on your creditworthiness. Here are other positive features of the Credit One Bank Cash-Back Rewards Visa:
- You won't need to tie up money in a security account.
- You receive one percent cash-back on many items, such as gas and/or groceries. Check the terms and conditions for more information.
- You receive free credit score tracking to keep tabs on your credit score.
After demonstrating responsible credit use, Credit One Bank may offer additional opportunities to increase your line of credit. Credit One Platinum Visa offers a lower 20.24 to 26.24 percent variable APR. If you need to carry a monthly balance, it's important to choose a credit card with a competitive APR.
Indigo Platinum Mastercard
If you've ever filed for bankruptcy, it can limit your credit card options and seriously affect your credit history for years to come -- but the Indigo Platinum Mastercard doesn't discriminate. This credit card is perfect for anyone who's struggling to secure another credit card, secured or unsecured. The Indigo Platinum Mastercard has more relaxed requirements for those looking to qualify, and even offers the ability to pre-check if you qualify to keep your credit score from taking a hit.
There's no deposit required for this credit card, but it does come with an annual fee.
Here are some of the benefits of the Indigo Platinum Mastercard:
- Paying your balance on time each month will strengthen your credit score.
- As an unsecured card, you're given access to a credit line without putting your own money upfront.
- Applicants aren't disqualified simply because of bad credit or previous bankruptcy.
The Indigo Platinum Mastercard does carry high interest, so it's important to pay your account in full each monthly billing cycle to avoid interest charges.
Use the top three credit cards for bad credit as part of a credit-building program. Check your credit reports regularly. Dispute any errors you find because, according to the Federal Trade Commission (FTC), many consumer credit reports contain errors.