The average FICO score of Americans is a high 700, which falls under good credit rating. To be specific, around 56.8% of the U.S. population has a good or better credit score. Around 13.2% have not-good but not-bad scores of 650 to 699.
On the flip side, the same studies show 30% of Americans have a bad or worse credit rating. These are the ones who have lower chances of getting loans and credit cards with great terms. If there’s any financial product available to them, it’s not often favorable.
This means that if you’re one of the 30%, you may have a hard time getting an unsecured credit card. But is it impossible? Read on to find out how to get a credit card with bad credit.
1. Check Your Credit Score
Before you learn how to get a credit card with bad credit, you first need to know where you stand.
It’s going to be hard to qualify for an unsecured credit card with a bad credit score. Financial companies look at it to determine your credit risk. A poor credit score means you have a history of not paying your dues, increasing the risk they’re taking.
With an unsecured credit card, they have less assurance that you’ll be able to make payments. This explains why you have better chances of getting a secured credit card, which requires a deposit. Should you be unable to pay off your balance, they can use the deposit as collateral.
However, this doesn’t mean it’s impossible to get an unsecured credit card. You have to first make sure where you stand.
Get a credit report from one of the three main bureaus: TransUnion, Experian, and Equifax. You can get one free credit report per year from each bureau.
You can also use services from certain websites who can give you a free version of your credit score. Beware of some websites that ask for your credit card details to do this. You may be signing up for a free trial period that charges your card afterward.
Once you have your credit report, review your credit score. This gives a better understanding of how your application will look like. You’ll also be able to know how to get a credit card with bad credit and how to search for an unsecured credit card that best fits your situation and expectations.
2. Try to Raise Your Credit Score
No matter where you stand, you have better chances of getting approval if you raise your score even by a few points. You can do this in two ways:
- By disputing any errors in your credit report
- Or by paying off your collection amounts.
This is another advantage of claiming your free credit report. You can examine it in extreme detail to see if there’s any inaccurate information.
There may be a guaranteed approval loan that has an unpaid status, for example, but you’re sure that you’ve already paid for it. In worse cases, you may have an account you don’t remember opening. This is a serious matter you should report at once.
The credit report should instruct you on how to make a dispute.
If there’s any bill that went to collections, you should pay that off, too. It’s one of the quickest ways to raise your credit score a little. While this may not get you out of the poor credit tier right away, it will at least make your credit look a little better.
If you can wait a while before getting a credit card, you may be able to further improve your score by paying your other bills on time and paying off any debt in your credit score.
3. Build Your Credit First
If you have no credit or bad credit, you may be able to get to the fair or good credit status if you wait a few months. This requires huge efforts and great patience on your part though.
After paying off everything you can pay now, start paying your bills on-time starting from now. Put most of your income into debts and make sure you don’t miss a due date anymore.
Over time, this will increase your credit enough to build your credibility as a borrower. Credit card companies only care about your capability to pay them. If you show that you’re now a responsible borrower, you may now qualify for an unsecured credit card.
Start with a Secured Credit Card First
Another long-term plan you can take action on now involves applying for a secured credit card. You can then claw your way up by using the card often and paying the full balance each month.
It requires a deposit, though, so if that’s preventing you from getting one, save up for it first. Setting aside $50 a month can get you a secured credit card in four months with a $200 credit limit.
Some credit cards can bump up your limit without more deposit under certain terms. For example, they may increase your credit limit six five on-time payments.
Some will also allow you to transition into an unsecured credit card after you’ve proved to be a responsible borrower.
You get your deposit back, and you can enjoy the benefits of an unsecured card. Having one also makes you look better as an applicant if you ever decide to apply for a new line of credit.
4. Don’t Bother Applying for Credit Cards for Good Credit
Each time you apply for a credit card, the company makes an inquiry on your credit score. This is a hard inquiry, which has a small effect on your credit score. In some cases, it may lower your score by a few points.
The opposite is a soft inquiry, the same as what you see for no credit check loans. This happens when employers perform background checks, for example.
If the inquiry isn’t for opening a new line of credit, it’s a soft inquiry. This doesn’t have any effect at all on your credit score.
When several institutions make a hard inquiry in a short span, your risk increases. This signals to them that you’re getting ready to create a lot of debt.
As such, you may want to hold off applying to credit cards you know you don’t qualify to with the sole purpose of trying.
In general, credit cards with good terms and benefits are for people with good credit only. These have low APRs and excellent rewards.
5. Look for Companies Offering Credit Cards for Bad Credit 2019
The best way to start looking is to search online. Take a look at our list of best unsecured credit cards for those still suffering with bad credit, for example. You can start by checking to see if you qualify for these cards today.
There are other updated lists you can look at, you only have to research well. Some services also allow you to see where you can qualify and compare them.
In some banks, you can check if you’re pre-approved, which is a soft inquiry so it won’t make a dent on your credit score.
Some retail stores may also give you an unsecured credit card without even if you have bad credit. This is because the credit cards likely have a limited purpose – i.e. you can only use it at that store.
If your only purpose is to build your credit with an unsecured card, you can take advantage of that. It’s also a good option if the store carries what you were planning to buy with the credit card.
For other purposes, however, you’ll have to stick to other solutions.
6. Manage Your Expectations
Unsecured credit cards are the best choice because they often have the best terms. For those with bad credit, however, that’s not the case. Any financial products geared toward people with bad credit, from credit cards to loans, has not so appealing terms.
Such credit cards, whether secured or unsecured, may have a low credit limit. It may also have higher interest rates and non-existing rewards programs.
Some can still have some sort of reward program to keep you invested. Still, they can’t compare to credit cards for people with good credit.
You must be sure you’re ready to take on these risks if you’re adamant about getting an unsecured credit card. Use your credit card only for purchases you can pay with cash right away. This way, you don’t put yourself in more debt because of the high-interest rates.
If you’re not careful, you might incur more debt that will cause your credit to fall even deeper.
7. Get a Co-Signer
If you have bad credit or no credit history, you may be able to get a card by having a co-signer. This will be the person responsible for paying off your debt if you become unable to.
This means whoever this person is will be taking a huge risk for you. Make sure he/she knows the consequences. If they trust you enough, they’ll be willing to co-sign your application.
However, he/she must meet the requirements of the credit card you’re applying for.
Learn More on How to Get a Credit Card with Bad Credit
Our tips above should help you get started on building your qualifications and searching for the right credit card for you.
If you need more tips on how to get a credit card with bad credit, though, feel free to read our other blogs about the subject, such as our article about paying off your credit card debts fast.