Best credit cards for bad credit of November 2024

Can I get a credit card with bad credit?

Yes, you can get a credit card with bad credit, although your options may be limited.

Since those with bad credit often have a history of missed payments, delinquent accounts or even bankruptcy, some credit card issuers are hesitant to open accounts for those with low credit scores, but fortunately, not all card issuers feel this way. Some understand that people go through difficult times, for whatever reason, and deserve a fresh start on their finances.

The best credit cards for bad credit will most often be secured credit cards, though, there are a few unsecured credit cards available for those with low credit scores, too. Let’s dive further into the differences between these two types of credit cards:

Secured vs. unsecured credit cards

A little different than traditional credit cards, many of the cards on the list above are “secured cards” that require a refundable deposit in order for you to qualify. Most of the time, the structuring is easy. The higher the deposit you put down, the higher the line of credit. If you put down a $500 deposit, you then have a $500 line of credit. It’s as easy as that.

Sometimes a card will have a limit on how much of a deposit you can put down, but almost always, there will be a minimum deposit amount; usually around $200 (but not always that high).

You can generally add to your deposit to increase your line of credit (within limitations), and sometimes, as with the CardName, you can be considered for a higher credit line just for making payments on time, with no additional deposit needed.

That deposit might initially make secured credit cards less appealing, but remember, it’s refundable, and this safety net is there for a reason. For one, it should encourage you to use your card responsibly, and to only spend within your means, and then on the other side of things, it protects banks in case you’re unable to make your payments. If you have low credit, you are a risk to banks, so a refundable security deposit is a small price to pay in the long run. Do keep in mind though that the security deposit does not cover your monthly payments. You must still pay at least your minimum payment due on time each month.

Secured credit cards aren’t meant to be used forever. They are a tool used to help improve your credit. Once you achieve a better credit score, you’ll likely become eligible to graduate to a more lucrative credit card offering rewards, and no security deposit. So again, this is a small price to pay for a better financial future.

There are also unsecured credit cards for those with bad credit. These cards don’t charge a deposit, but they may come with an annual fee. The CardName, for instances, charges an annual fee.

Most credit cards are unsecured credit cards, which are a type of revolving debt. This means you’re approved to spend up to a certain amount on the account, and you can choose to pay off the balance in full each month, avoiding interest charges, or revolve it to the next month. Just keep in mind that you’ll pay whatever your APR percentage is on that revolving debt, so revolving it isn’t often a good choice. Most rewards credit cards are unsecured cards, and some of these cards also have annual fees, but with that annual fee comes so much more than you’re likely to find with an unsecured credit card designed for someone with bad credit.

Whether secured or unsecured, most of these cards offer credit building tips, credit score tracking and reporting to the three major credit bureaus, so with responsible spending and bill paying, you could be on the road to a higher credit score (or a more rewarding credit card) in no time!

What is the best credit card for bad credit?

The best credit cards for bad credit aren’t meant to be too exciting, as they’re designed to help you rebuild your credit; however, the CardName regularly sticks out to us thanks to a low security deposit requirement, and some of the same great benefits offered by more lucrative Capital One credit cards such as fraud coverage and emergency card services. Plus, with this card you can gain access to a higher line of credit in as little of six months, with no additional deposit required.

When it comes down to it though, the important thing about the credit cards on this list is that they’re all designed to help you build better credit, so if you have bad credit, they’re all good cards. If your credit is great, you might not find these options too appealing, but if you’re searching for the best credit card for bad credit, the options on this list are an ideal place to start. The most important things to consider will be the annual fees and security deposit requirements. If a card has any added perks, that’s just the cherry on top. Be sure to not get distracted by extra features though. Remember, the point of these cards is to help you build your credit. Once you do so, you can have fun shopping for cards offering more bells and whistles. You worked hard to build your credit, so you deserve it, afterall!

How to find your credit score?

You are entitled to a free copy of your credit report from each of three major credit reporting agencies– Equifax®, Experian®, and TransUnion® – each year, but keep in mind that these credit reports will not show your credit score. Credit reports show how you’ve handled credit accounts, including the types of accounts and your payment history, as well as certain other information that’s reported to credit bureaus by your lenders and creditors.

Some of the cards above offer cardholders easy access to their credit scores, which is a great way to keep a close eye on progress; however, it’s also important to know what your score is before you apply for a card. Without this information, you won’t know what type of credit cards you are eligible for. There are a number of free sources which will allow you to find out your credit score. Our preferred is Credit Sesame, who provides a free credit score, credit report card, and a personal credit analysis.

What is a bad credit score?

There are two main credit scoring systems used today: FICO and VantageScore. FICO scores, which tend to be used more often in lending decisions, range from 300-850. Anything below 580 is generally considered a poor score, and about 16% of consumers have bad credit scores on the FICO scale, according to the credit reporting company Experian.

VantageScore also runs on a scale of 300-850. Scores ranging from 500-600 are considered poor and those below 500 are very poor. Experian notes 21% of consumers have poor VantageScore credit scores while 5% fall into the very poor category. Those with very poor scores are especially likely to have difficulty being approved for a credit card.

Learn more about Fico vs VantageScore.

What causes bad credit?

Now that we know what constitutes as bad credit, let’s discuss how someone’s score ends up in the poor category. Since FICO scores are used more often, we’ll focus on their scoring model.

According to myFICO, the official consumer division of FICO, the following criteria is used to calculate credit scores:

• Payment history – 35%
• Amounts owed – 30%
• Length of credit history – 15%
• New credit – 10%
• Credit mix (types of accounts) – 10%

There are a variety of reasons why you could have a low FICO credit score, but some of these reasons will lower your score more than others. If you have a low credit score, you may have one or more of the following factors:

• No credit history – With no history, a lender cannot tell whether or not you are a credit risk.
• Late/missed payments – These may cause lenders to view you as unreliable.
• Defaulted personal loans – Past defaults cause concern about future transactions.
• Home short-sale – Missed payments that frequently accompany a short sale negatively impact credit scores.
• Home foreclosure – Lenders often consider those with a foreclosure history to be high-risk borrowers.
• Bankruptcy – Past inability to repay debts can significantly lower your credit score.

Why is it important to raise bad credit?

A lower score indicates to lenders that you are a credit risk, and you may not pay back the money you have borrowed. In order to offset the potential loss that a lender may incur by lending to you, the rates and fees offered to you are typically higher than those offered to people with good credit scores. That means, for the same purchase, you may be paying more than someone with a higher credit score. For example, a landlord may charge you a larger deposit in order to rent an apartment or, if you carry a balance on a credit card, your interest charges are higher.

Because building a good credit score requires a history of timely debt repayment, a good credit score indicates to lenders that you are likely to repay the money you borrow. As desirable customers, those with high credit scores are offered the lowest interest rates on different types of loans including automobiles, homes and credit cards. Potential employers may also view your credit report, however, employers do not check credit scores.

How to raise credit score?

While there is nothing you can do to erase old missed payments, you can boost your score by ensuring any future debt payments you make are on time. Making regular payments and avoiding any future charges or loans will also bring down the overall amount of debt you owe. That also will help raise your score.

Creditors aren’t only looking at the total amount you owe, but also how much of your available credit lines you are using. This is known as a credit utilization rate or ratio. A low credit utilization rate helps boost your score. It indicates that you are being responsible about using your credit and aren’t overextended financially.

However, maxed out credit cards and lines of credit result in a high credit utilization rate. That’s a red flag to companies which may worry you’re in financial distress or at risk of being unable to pay back what you owe.

If you already have a line of credit that is near its limit, focus on paying down that debt as quickly as you can. Using no more than 30% of your available credit is ideal, according to Experian.

The more you understand about how everyday decisions can affect and be affected by your credit score, the easier it can be to make decisions that rebuild your credit standing. Here are some terms you should know:

• FICO. FICO is now the official name of Fair Isaac Corporation, which created the popular FICO credit scoring model.
• FICO credit score. A number between 300 and 850 indicating your creditworthiness.
• Credit report. A detailed history of all lending accounts that are reported to any or all of the three credit bureaus.
• “Hard” inquiry. A record of any time a lender, credit, service or insurance provider reviews your credit history. Multiple inquiries within a short time-frame can have a negative impact on your credit score. If you’re shopping for a mortgage or an auto loan, however, FICO allows multiple inquiries within a one-month time span and counts them as one hard inquiry.
• “Soft” inquiry. A record of your own requests to review your credit history. Frequently, but not always, requests by employers, landlords, insurance companies are considered a “soft” inquiry. Credit card issuers that may send you pre-screened credit card offers often use a “soft” inquiry. They are not visible to creditors and do not affect your credit scores.
• Creditworthiness. A term used to convey how your risk as a borrower. If you have good credit, then you are “worthy” of being given “credit” by lenders.
• APR. Annual Percentage Rate. This number is the actual yearly cost of borrowing funds over the term of a loan. If your credit card statement only lists the APR, you can get your monthly interest rate by dividing this number by 12.
• Annual fee.Secured credit cards often come with annual fees. Credit cards that offer perks and rewards also often have an annual fee.
• Equifax, TransUnion, Experian. The three major credit reporting bureaus.

Now you know the terms, so where to go from here?

Get a secured credit card

A secured card is a credit card designed for those with no or bad credit. It requires a deposit be made to the card issuer, so the issuer is not in a position to lose money if you default on a payment. The interest rate is often higher than average and there may be fees associated with this type of card. Yes, right now, you are paying more for having bad credit, but that can change. Once you have established a good payment history with this card, it may be possible to qualify for an unsecured card with a better rate and few or no fees. Before you apply for credit card offers for bad credit, be sure to ask the issuer if they report your account to the credit reporting bureaus.

Think about credit differently

This is not free money and it’s not even ideal to use for emergencies (hello, rainy-day fund!). From here on out until better credit and spending habits are established, a credit card is only a report card to credit agencies to prove that you’re not a significant lending risk. Make a few small purchases of things you would buy every month anyway, such as gasoline, and pay the balance, on time and in full, at the end of every billing cycle.

Be disciplined

You’re not going to get anywhere if you can’t pass up the coffee house, the sale sign or drinks with friends. Be aware that the splurges aren’t the only thing that can get you in trouble.

Be patient

Your credit will not rebound overnight. It could take years to build a reputable credit file. But many companies report your activity at the end of every billing cycle, so your credit is reevaluated by the major credit bureaus regularly. You may not feel that 10 or 15 points is big improvement, but in a few short years, it could make a big difference in the rates you pay.

How many credit cards should you have?

During this period of rebuilding your credit, one secured card is enough. As your credit improves, you may even see pre-screened offers come in the mail. After about six to nine months of responsible credit practices, you could add one more. A couple of revolving accounts in good standing will help to raise your score. Take the time to carefully find a card that will suit your new needs. A low-interest rate card with no annual fee might be a good place to start. Credit cards are not stamps or baseball cards– no need to collect them all.

How to choose a credit card for bad or limited credit?

When it comes to choosing a credit card for bad credit or credit cards for no credit, many of our typical recommendations don’t really apply. Usually we would suggest that you think about things like what kind of rewards you’d like to earn, such as cash back or travel rewards; what kind of benefits would suit you most, like 0% intro APR and balance transfer offers; whether or not you are willing to pay an annual fee; and the like. Unfortunately though, with credit cards for bad or limited credit, the questions you’ll need to think about when doing your research aren’t as exciting.

It’s not quite time to start thinking about reward cards just yet, though some of the cards above do offer some minor rewards, such as an unlimited cash back match and 2% cash back earned at gas stations and restaurants (on up to $1,000 in combined purchases each quarter) and 1% on all other purchases with the CardName. This is a good offer for a secured credit card, but remember, the point of secured credit cards are to build your credit score so you can work towards even better things.

Instead, for now, if you’re shopping for a credit card for bad credit, it’s important to think about things like security deposits, annual fees, credit limits, and APRs. Sure, not as fun, but if you think smartly about these things now, it’ll help to set you up for a better financial future so that perhaps later you can think about things like welcome bonuses and more lucrative benefits.

Credit cards for bad credit and credit cards for no credit can still be fun, but they serve a different purpose. To see your credit score gradually increase is something to feel good about, and to be excited about. Then eventually, once your credit score reaches good, or even excellent, you can really have some fun! Just remember that when that happens to keep all of your hard work and new good financial habits in mind, so that you can keep your credit score high and continue to enjoy the benefits that a healthy credit score can offer.