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If you have a low credit score, you might be surprised to learn that getting a new credit card could actually help. If you can get approved for a new card despite poor credit, you’ll have the opportunity to develop better credit and credit habits through responsible use. Not only that, but adding a new card can improve your credit utilization ratio and your credit score if you’re already in debt.

Unfortunately, credit card options for people with bad credit tend to have few benefits. For example, you usually won’t get a welcome bonus with these types of cards, and they usually charge fees, like annual fees and foreign transaction fees. Credit cards for bad credit can also carry high interest rates, which can make carrying a balance an expensive endeavor.

But with all that said, it’s important to understand that some credit cards for bad credit are considerably better than others. So, let’s take a look at the types of credit cards you may be eligible for with poor credit, as well as how you can use them to your advantage.

Click here for the latest list of the best credit cards for people with poor credit scores.

If you have bad credit, you probably already know it. After all, a low credit score usually means you’ve been turned down for a credit card or other loans in the past because a lender deemed you too high a financial risk. You also likely know why you have bad credit to begin with, whether it’s because you let a loan or credit card default, had an account in collections, or have a bankruptcy on your record.

But even if that’s the case, it never hurts to check your credit score to know exactly where you stand. Fortunately, there are quite a few ways to check your credit score for free.

You can start by signing up for a credit monitoring service that provides a free credit score or a program that offers free credit monitoring tools. For example, Experian Boost offers consumers a free look at their FICO credit score and can even help you improve your score fast.

As you work on your credit score, you’ll probably want to pay more attention to your FICO credit score, since it’s the most widely used scoring model. FICO credit scores range from 300 to 850 and are divided into the following levels:

  • Excellent: 800 and above
  • Very good: 740 to 799
  • Good: 670 to 739
  • Fair: 580 to 669
  • Poor: 579 and under

While truly “poor” credit is a FICO score of 580 or below, “fair” credit between 580 and 669 is still below average compared to other US consumers. If your credit score is in any of these categories, you need to take steps to improve it as quickly as possible.

See if you qualify for one of these credit cards for people with fair credit.

If you have bad credit, there are two different types of credit cards you may qualify for: secured credit cards and unsecured credit cards.

Secured credit cards are often the easiest to get if you have bad credit. However, secured credit cards require a cash deposit to get started. This means you may need to put down $200, $500 or more as collateral, and you’ll usually get a low credit limit that’s equal to or close to your deposit.

The biggest benefit of secured credit cards is that they are usually reported to the major credit bureaus. This means that all of your on-time payments are added to your credit report, which can help you improve your credit over time. And while you do have to make a cash deposit to open a secured card, if you later close the account or bring it back into good standing with a $0 balance, your deposit will be refunded.

Save money with these best credit card deals for people with low credit scores.

In addition to secured credit cards, you may also qualify for an unsecured credit card with bad credit. These cards tend to have fees, low credit limits, and few perks, but they can help you build credit just the same.

Store credit cards are also a type of unsecured credit card that may be easier for people with bad credit to approve, since they can usually only be used at the store or chain that issues the card.

Aside from being easier to get approved for, the biggest advantage of store credit cards is that if you find yourself shopping often at a particular retailer, you may be able to save some money, either on your initial purchase. or in the future. future shopping trip. Using a store credit card typically saves you 5% on your purchase, and store credit cards can also have other benefits that you may not have thought of.

Before you get a new credit card, you need to make sure you have a clear understanding of what you hope to accomplish. While getting a credit card gives you the opportunity to improve your credit, it could worsen your credit if you’re not prepared for the responsibility. So before you apply, ask yourself these questions:

  • Do I plan to carry a balance? If you want a credit card to have the option to carry a balance, you should know that credit cards for bad credit come with high interest rates. Not only that, but secured credit cards require you to put down cash as collateral, so they’re not a good option if you need a loan.
  • Am I interested in rewards? Some credit cards for people with bad credit offer the opportunity to earn rewards for your spending. While the rewards can be lucrative, keep in mind that they often entice people to spend more than they planned.
  • Do I want to pay an annual fee? Not all credit cards for people with bad credit charge annual fees, but some do. If you decide to pay an annual fee, you need to make sure that the benefits you get in return are worth it.
  • Am I ready to take my credit seriously? A new credit card gives you a chance to improve your credit, but it won’t happen automatically. For the most part, getting a new credit card will only help your situation if you keep your balance low and always pay your bill on time.

The best credit cards for people with bad credit may not sound very appealing, but the point is to use them to boost your credit score so you can qualify for better deals later on. But there are a few “mistakes” to be aware of and watch out for, including:

  • RateNote: While you should strive to avoid annual fees if you can, you should also be aware that some credit cards, especially those for people with bad credit, try to charge an account opening fee or a program fee. Avoid these offers as much as possible.
  • high APRs: Beware of high interest rates that can make borrowing incredibly expensive. In fact, if you plan to use a credit card to improve your credit, you should try to avoid carrying a balance on the new card altogether.
  • credit errors: Finally, beware of the mistakes that hurt your credit in the first place. The worst thing you can do is pay your credit card bill late, as it will have a huge negative effect on your credit score, so avoid this at all costs.

Compare credit card offers available to people with fair credit.

If your goal is to get a new credit card to help rebuild your credit, you first need to know and understand how your credit score is determined. Let’s take a closer look at the five factors that make up your FICO credit score:

  • Payment history: 35%
  • Amounts owed: 30%
  • Length of Credit History: 15%
  • New Credit: 10%
  • Credit mix: 10%

Looking at these factors, it’s easy to see what your next steps should be. Most importantly, you should strive to pay your credit card bill, and all of your other bills, on time every month. In addition, you should keep your debt to a minimum, since the amount you owe relative to your credit limits makes up 30% of your FICO score, also known as your “credit utilization ratio.”

Since any credit card you get with bad credit will likely have a low credit limit to begin with, you’ll need to be especially careful not to go over your credit limit and to pay off your balance as much as possible each month to maintain your utilization rate. low credit.

The length of your credit history can also be increased by keeping your older credit accounts open and in good standing, and you can keep your score high in the “new credit” category by refraining from opening too many new accounts.

Your credit mix is ​​a final category to consider, but you may not have many different types of credit, such as installment loans like a mortgage or car loan, when your credit score is fair or low. Once your credit score improves, you can worry more about diversifying your credit with installment loans, revolving accounts, and other types of credit.

In the end, if you’re going to get a new credit card in an effort to improve your bad credit, you want to make sure you’re not making the same mistakes that got you into trouble in the first place. So if you decide to apply for a new credit card, be smart about how you use it. Don’t overspend, don’t pay your bills late, and avoid high-fee cards so you can get back on the road to good credit.

Learn more and apply now for the best credit cards you can get with a bad credit score.

Is your credit score good or excellent? Or maybe you have no credit at all? CNN underlined has you covered with our other stories in this series:

Check out CNN Underscored’s list of best credit cards available right now.

Get the latest personal finance deals, news and advice on CNN Underscored Money.


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