How do you apply for a credit card if you have bad credit?
While some stopped caring about credit scores for a variety of good reasons, others are struggling to build it from scratch or to repair the damage done by carelessly handling their finances.
Regardless of the reason you need a credit card, applying for one with bad credit can be tricky.
Most credit card issuers will turn you down.
You need a good credit score to prove you can handle a credit card wisely. But you might need a credit card to build your credit score!
A bad credit report or a really short credit history usually hurt your chances of getting approved for that credit card you were hoping to get your hands on.
All is not lost though!
There are a few ways you can apply and still get approved for credit. Here are some tips to apply for a credit card with bad credit.
Know your credit score
Don’t know how bad your credit situation is?
Get your free credit report at annualcreditreport.com and find out!
Credit scores range between:
- 300 – 629 – bad credit
- 630 – 689 – average credit
- 690 – 719 – good credit
- 720 and above – excellent credit
It’s important to know where you stand and begin improving your credit history as soon as you can.
Try applying for a credit card for bad credit
Certain credit cards are designed especially for people with bad credit.
Until your credit score starts improving, you could try applying for one of these.
They typically come with low credit limits, high interest rates and annual fees, but this is to be expected.
After all, a bad credit history comes with consequences.
Most common credit cards for people with bad credit are store credit cards.
Retail stores are known to increase their customer base by having lower standards when approving credit cards.
They have their disadvantages (such as high interest rates and whatnot), but as long as you pay your balance in full each month, you should be fine.
Apply for secured credit cards
The next best thing would be applying for a secured credit card.
Most are reluctant to opt for them because of the deposit you’d have to pay upfront. In some cases though, having a secured credit card is better than not having a credit card at all.
Typically, the deposit should match or sometimes exceed your credit limit. This translates into at least a few hundreds as collateral, but having bad credit often comes with financial sacrifices.
Once you’re approved and start using your secured credit card wisely, you credit score should start to improve!
Have someone with good credit co-sign for you
Although tricky and risky, you could ask a reliable loved one to co-sign a credit card for you.
This means someone with a good credit score guarantees your credit card balance will be paid for.
Credit card issuers need to be sure the credit cards they approve will be paid for, so having someone creditworthy co-sign is a big help.
However, there are two major downsides to take into consideration.
First, finding someone willing to co-sign a credit card for you is extremely difficult. Put yourself in their shoes, would you put your credit history and savings at risk for someone with bad credit?
Second, this still doesn’t guarantee your credit card application will get approved.
Becoming an authorized user
Although just as tricky as having someone co-sign, you could attempt to become an authorized user on someone else’s credit card.
The similarity is obvious: you get to spend money that someone else guarantees they pay back. Not a pleasant situation for the primary account holder, as you can imagine.
However, becoming an authorized user isn’t the same as having a co-signer.
The credit card you become authorized to use won’t be yours, but in someone else’s name.
Also, your credit score should start improving, but it’ll take you a lot longer to reach the desired score range to apply for your own credit card. Because you’re not the primary account holder, your score will improve a lot slower!
Be careful when applying for unsecured credit cards
Although tempting, you should probably avoid applying for unsecured credit cards, at least until your credit history improves.
Certain unsecured financial products do target people with poor credit scores, but unsecured credit cards for bad credit usually come with ridiculous fees!
You’re not required to pay an upfront collateral, but the interest rates and fees attached are probably not worth the hassle.
Besides, if your credit score is really bad, chances are you won’t get approved for an unsecured credit account anyway.
Since each application ends up on your credit report, you should avoid lowering your score any further by applying for many credit cards at once!
Bad credit has its consequences, but after careful research, you should find a way to get approved for a credit card, even with bad credit.
Once your credit history starts improving, you’ll become eligible for better credit cards, with better terms and rewards.
Have you ever had bad credit stand in your way?
What helped you get approved for a credit card?
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