Credit Cards

Do you have bad credit? There are still credit card options for you

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Don’t give up on a credit card just because your credit isn’t good.

Key points

  • Bad credit can affect your ability to borrow.
  • It is still possible to get a credit card if you have bad credit.
  • Secured cards are a good option for people with bad credit.

Having bad credit can be really frustrating because you can find yourself in a situation where it’s hard to turn things around.

Most companies you want to do business with, from utilities to mortgage lenders, will check your credit before allowing you to become a customer. And if your credit score is low, you may not be allowed to borrow. The big problem with that is that if no one gives you new credit, you’ll have limited opportunities to show that you can be responsible with it. And demonstrating your financial responsibility is key to raising your credit score.

The good news, though, is that you can usually get a credit card even if your score is low. And if you use that card responsibly, you can improve your score over time and open the door to affordable loans and access to utilities with lower deposits.

How can you get a card even if your credit score is lower than you’d like and below what most card issuers want to see?

The best solution to get a credit card for borrowers with a low credit score

If you’re hoping to get a credit card with a low credit score and are having a hard time doing so, secured cards might be your best option.

Secured cards work a little differently than traditional credit cards. With most cards, you apply and the card issuer gives you a line of credit based on how much they trust you to pay back what you’ve borrowed. The only guarantee of payment they have is your word that you will cover at least the minimum due each month, and it can be difficult for them to take effective legal action to collect what is owed if you decide not to pay as promised.

However, with secured cards, creditors eliminate the risk of default. That’s because you have to secure the card with collateral. This usually means making a deposit with the card issuer that is held in a special account. The amount you deposit is equal to your credit limit. So if you opted for a $500 limit secured card, you would deposit $500 and have access to a $500 line of credit.

Secured credit cards work much like regular credit cards.

Aside from the fact that you have to make a deposit, secured cards work in a similar way to regular credit cards. You are allowed to charge up to the credit limit you have been given and you are expected to make payments each month. As you pay off your balance, you free up your credit and you can charge again. And your payments are reported to credit reporting agencies so you can build a positive payment history. Depending on the secured card, you may even be able to earn rewards for the charges you make.

Since there is no risk for creditors to garnish your funds deposited with a secured card, you can usually get this type of credit no matter how bad your score is, even if you’ve had a recent bankruptcy. If you’re sure you’ll avoid running up a large balance or missing payments, you should consider getting a secured card as soon as possible so you can start using it to improve your credit score and open the door to new lending opportunities. .

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