If you have bad credit, you aren’t alone. Experian estimates that 30 million people have poor or bad credit, and that number could continue to rise in the coming years.
For credit card providers, this is bad news. Credit card companies only make money when people are using their services to pay for goods. To make money, they have to put their cards in the hands of as many people as possible.
Many companies now provide unsecured credit cards for bad credit so that they don’t alienate 30% of consumers. If you’re looking for a credit card to help you build your credit and manage emergencies, this means that you’re in luck.
Before we look at unsecured credit cards for people with bad credit, let’s look at the difference between secured and unsecured.
Secured Credit Cards
Secured credit cards are for people with poor credit that only want a card to bring up their credit score. These cards require a deposit to start the service, and that deposit is typically the starting line of credit, minus the fees.
This arrangement might seem strange, but it’s meant to protect the issuer of the card. Remember, credit card companies only make money when they give cards to people that use them and pay them off. The deposit is a guarantee that you’ll give them the money you owe them. If you have a strong payment history, the card issuer will often offer you higher credit limits that exceed your deposit.
Unsecured Credit Cards
An unsecured card is one in which the borrower doesn’t put down a deposit. The line of credit comes straight from the bank offering the card and you have the option to get something now and pay later.
These cards also allow you to build up your credit score, but often, you’ll need a higher credit profile for approval. You’ll also need discipline when it comes to paying them off. If you miss payments, your credit will suffer.
Some unsecured credit cards that cater to people with low credit, although they often charge higher interest rates and provide a lower credit limit. Once you prove your creditworthiness, companies give you higher limits and lower interest rates.
Building your credit score over time is the best way to prove that you deserve cards with better terms. If you use a credit card correctly, it won’t take long before you notice a bump in your score. How do you use cards to rebuild your credit?
Rebuilding Your Credit
The obvious way to accomplish this is to make your payments on time. Late payments show up on your credit report and affect your score. There are other consequences to paying your bill late.
First, you’re charged late fees. These fees vary but are often $35 or more. Those late charges add up and can turn a small purchase into a large bill.
Creditors might also decide to raise your interest rate if your payment is 60 days or more overdue. Your new interest rate, or “penalty rate” could be extreme. Often, companies charge you the highest interest the card allows in an attempt to recoup their money. Remember, credit companies assume the risk of missed payments; higher interest rates are a way of mitigating this risk.
Any payment over 30 days late shows up on your credit report. Since payment history makes up 35% of your credit score, you should expect to see that all important number drop as well.
You should also keep your overall debt low. If you have $10,000 in credit card debt and make $40,000 a year, your debt to income ratio is at 25% or higher. This makes you a high-risk consumer. Credit card and other companies that offer credit don’t like taking risks.
Steps To Take When Rebuilding Your Credit
To rebuild your credit, your first step should be an examination of your credit report. Companies might make an erroneous claim against your credit, but you have the right to dispute a charge. There are many cases where credit scores rise by 100 or more points after credit agencies remove faulty charges.
Second, get a credit card, small loan, or another form of financing that reports to the three big credit agencies. You need to ask the company extending credit if they report to the agencies. Never assume that they do. Many small lending companies don’t report to these companies because it costs them time and money to do so.
Make sure you read the terms and conditions of the credit offer carefully. Look for terms that could put an undue amount of stress on your finances. Never assume that you’ll receive income that isn’t already guaranteed. If that potential income falls through, you’ll foot the bill for a card that you can’t afford.
One last tip to rebuild your credit is to contact companies on your credit report that you owe money too. Try to set up payment options, but never pay off a debt without getting it in writing that they will remove the strike against your credit report.
You don’t want to send a company hundreds or thousands of dollars if they refuse to remove the charges from your credit report. Start small and work your way up to the bigger charges on your report.
Are you interested in getting an unsecured credit card? Here are the best unsecured credit cards for those with bad credit.
Fingerhut Credit Card
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Regular APR Annual Fee Credit Recommended Our take 0% No annual fee Bad, Limited or No Credit History Extensive catalog provides option for customers with damaged credit historyRegular APR0%Annual Fee No annual feeCredit RecommendedBad, Limited or No Credit HistoryOur takeExtensive catalog provides option for customers with damaged credit history
Horizon Gold Card
- Guaranteed $500 Unsecured Credit Limit.
- Must have Active Debit Card or Credit Card to qualify.
- $500 Credit Limit.
- No Credit Check.
- No Employment Check.
- Reports to a Major Credit Bureau.
- Fast Online Application.
- Bad Credit accepted.
Regular APR Annual Fee Credit Recommended Our take 0% No annual fee Bad, Limited or No Credit History Good option for customers with damaged credit history looking for a guaranteed approval cardRegular APR0%Annual Fee No annual feeCredit RecommendedBad, Limited or No Credit HistoryOur takeGood option for customers with damaged credit history looking for a guaranteed approval card
Credit One Bank Platinum Visa For Rebuilding Credit
If you have low credit, one of the most annoying facts about applying for credit cards is that it can lower your score even more. With the Credit One Bank Platinum Visa, you don’t have to worry about this.
You can check to see if your pre-approved without putting a mark on your credit score. Another tool for rebuilding your credit is being able to check your progress online. Credit One gives you access to your Experian credit report so you can see how every payment affects your score.
Perhaps the greatest benefit of this card is the cash back you’ll receive by using your line of credit. Most unsecured credit cards for bad credit don’t give you the perks that people with good credit enjoy.
You’ll enjoy 1% cash back on almost everything you buy, from grocery, gas, movie tickets, and more. The cashback goes on your statement every month to help you pay off your balance.
This card also gives consumers the opportunity to change their payment due date to six days before or after their original due date. After the initial pay cycle, all you have to do is call customer service and they’ll provide this option.
Total Visa Unsecured Credit Card
If you have bad credit, you might be nervous about getting a credit card. What if you have a card, charge more than you realize, and end up with massive payments that you can’t pay?
With the Total Visa Card, you won’t have to worry about this. You’ll have a credit limit of only $300 when you start the card, which might seem like a disadvantage until you consider the implications.
First, you’ll have to think before making big purchases on your card. You can’t go on much of a shopping spree with $300, and if you do, your payments will remain lower than larger credit limit cards.
Second, the smaller monthly payments help consumers manage their monthly statement. You’ll be able to build your credit history without breaking your bank account.
The card has a higher interest rate, so you’ll want to pay your balance in full, or as close to in full as possible. This lowers the amount you end up paying for everyday items. Once you’ve established your payment history, you can switch to a card with reward programs and a lower interest rate.
Official NASCAR Credit Card From Credit One Bank
Do you like racing? If you find yourself online spending money at the official NASCAR store or wish that you could, this is the card for you.
You’ll receive 1% cash back on all eligible purchases and double rewards for anything you buy at the NASCAR.com store.
There is the possibility of an annual fee up to $95, but no monthly fees, saving you money in the short and long-term.
The Official NASCAR Credit Card offers options to help you build your credit score. First, you can pick your due date so that you won’t have to pay another bill at the beginning of the month. Picking your due date helps ensure that you’re able to make your payments on time.
You’re protected by $0 fraud liability, meaning if someone steals your card or information you won’t pay a dime. All you’ll have to do is challenge illegitimate charges on your account and the money goes back into your credit line after an investigation.
Like the Total Visa, you have access to your Experian score so you can see the impact of paying your bill. Credit One also checks your payment history automatically to assess whether you’ll get a credit increase.
This card reports to the three major credit bureaus, so as long as you make your payments on time, your credit score will improve. It’s a great opportunity for anyone looking to rebuild or start their credit history.
First Access Visa Card
One reason people fall behind on payments is that they have a hard time accessing their account. First Access makes it easy for their customers to check their account balance at any time using their mobile phones.
At any time, you can log in on your phone to see your remaining credit limit, when your billing cycle begins and ends, and recent transactions.
First Access requires a checking account, but they have a history of approving people for credit cards when others won’t. They report to all three credit bureaus to help you improve your score and build your credit history as well.
If approved, you’ll need to pay a processing fee and you’ll have access to the $300 dollar credit limit. Pay your balance in full at the end of the month and before you know it your score will improve.
Surge MasterCard Credit Card
Most unsecured credit cards for bad credit begin with a credit line of $300. Surge, however, offers credit lines up to $500 depending on your credit history.
Those with low credit scores should apply for this card. The application only takes a few minutes. If the consumer isn’t approved for an unsecured credit card, the company reviews the application to see if a secured credit card is an option.
The results of the application come online, meaning you won’t have to worry about waiting for a letter in the mail. Online results are a popular option due to the potential for lost or stolen mail containing sensitive information.
Surge reports your payments to the major companies that determine your credit score. As with all other cards, the key to building credit is to use the card responsibly and make on-time payments. You have to convince companies that they should trust you; on-time credit card payments are the best way to accomplish this.
Let Us Help You Find Unsecured Credit Cards For Bad Credit
Bonsai Financial understands that each situation is unique. We also know that most people don’t want to go from company to company applying for credit. We are an online marketplace that looks at your particular circumstances and suggests the right card for you.
Credit companies need to loan money to make money. By using an online marketplace, you’ll connect with companies that offer unsecured credit cards for bad credit.
All you have to do is fill out a quick online form and you’ll be on your way to rebuilding your credit. Don’t wait, begin your journey to financial freedom today!