How to get a credit card with bad credit
If past financial mistakes have caused your credit score to drop below 580, FICO considers your credit poor or bad. Having bad credit can make it hard to get approved for a credit card with good terms, since it signals to lenders that you may be a risky borrower.
But there’s light at the end of this tunnel. There are several cards available for people with bad credit that don’t charge high fees or outrageous interest rates. Some will even offer rewards for the purchases you make using the card. Plus, using your card responsibly over time can help boost your score — allowing you to qualify for a better card in the future.
What is a bad credit score?
FICO, the credit score used by 90% of top lenders, considers a score ranging from 300 to 580 to be bad or poor. According to Experian, 16% of Americans fall within that range.
FICO’s competitor, VantageScore, considers a range of 500 to 600 to be poor, and 300 to 499 to be very poor.
Your credit score is determined by the information that lenders give to the three major credit bureaus (Equifax, Experian and TransUnion) in your credit reports. The five factors that make up this score are:
What credit card can I get with bad credit?
Although you may feel like your credit card options are extremely limited, it’s important that you don’t settle for a card that’s loaded with fees and high interest rates. Instead, consider one of the following types of credit cards:
Secured credit cards for bad credit
If you have bad credit, your best bet will likely be a secured credit card. Unlike traditional credit cards, secured cards require a security deposit — usually starting at $200 — which will serve as your line of credit. The deposit essentially acts as collateral for the credit card company in case you don’t pay your bill. However, if you upgrade to an unsecured card or pay your balance in full and close your account, you’ll get your deposit back.
The Discover it® Secured Credit Card is currently our pick for the best secured card. It accepts applicants with limited/poor credit, requires a refundable security deposit ranging from $200 to $2,500 — and even offers cash back on every purchase.
Unsecured credit cards for bad credit
Unsecured credit cards for bad credit accept applicants with poor or limited credit without charging a security deposit. But in lieu of the deposit, these cards often come with higher interest rates and may charge fees.
For example, the AvantCard Credit Card, which is designed for those with limited/poor/fair credit, has a 35.99% variable APR and charges a $59 annual fee — and sometimes fees can range even higher than this. Some cards charge more than $200 per year in fees, including set-up fees, annual fees and monthly maintenance fees. You should carefully scan the terms and conditions for such fees before you apply.
Store credit cards for bad credit
Store cards or retail cards tend to be some of the easiest cards to qualify for. They usually have more relaxed credit requirements than traditional cards, and often come with rewards programs designed to get you to spend more than you normally would at the store — but also sky-high interest rates.
As an example, the Target REDcard™ Credit Card lets you get 5% off at Target in-store and online, though it also has a 29.95% variable APR.
How to choose a credit card for bad credit
When selecting a credit card for bad credit, it’s best to find one that fits the following criteria:
Falls within your credit range. To increase your likelihood of being approved for a credit card, you should first check to see if it accepts applicants with bad, poor or limited credit. Many credit card issuers include the type of credit that’s recommended for approval directly on their site. But even if a card lists “bad” credit as its requirement, having a bad credit score doesn’t guarantee approval. That’s because banks typically take other factors into account when determining your eligibility, such as annual income, monthly bills and bankruptcies.
Reports to the major credit bureaus. Make sure that the card reports your account activity to the three major credit bureaus — Equifax, Experian and TransUnion. That way, when you pay on time each month and stay well below your credit limit, you can build a positive credit history over time.
Doesn’t charge excessive fees. You should avoid cards that charge pricey fees, like set-up fees and monthly maintenance fees. That said, while there are several cards available for bad credit that come with $0 annual fees, there are also decent cards that do charge annual fees (typically $59 or less).
Has a reasonable interest rate. High interest charges can become quite costly if you have to carry a balance on your card from month to month. While credit cards for bad credit typically charge a higher interest rate than those for people with good or excellent credit, you’ll want to make sure the APR isn’t through the roof. For context, the average credit card APR is 24.59% as of Jan. 2024.
Provides tools to help build credit. Several cards for bad credit provide credit-building tools, like free access to your credit score and automatic account reviews to see if you qualify for credit limit increases.
Applying for a credit card with bad credit
Once you select a credit card for bad credit, follow these steps to apply:
1. Get preapproved
Many issuers let you see if you prequalify for a credit card before applying. While you aren’t guaranteed an actual approval even if you’re preapproved, this process is a good way to gauge your chances without affecting your credit score.
2. Complete the application
The next step is to complete a credit card application online, in-person at a bank, over the phone or through the mail. You’ll need to submit basic information, like your name, Social Security number, birth date, address, phone number, employment status, income and housing costs.
3. Build your credit for a chance to upgrade
If your objective is to get a credit card with better rewards or a lower interest rate, you’ll need to boost your credit profile by displaying responsible card usage. This includes paying your bills on time every month.
How to build credit with a credit card
By using a credit card responsibly, you can improve your credit score over time. Following these steps can help you qualify for credit cards with better rewards programs, more benefits and lower APRs in the future:
Pay your bill on time and in full every month.
Because your payment history is the most important factor affecting your credit score, you should always pay your bill on time. We also recommend paying your balance in full whenever possible to avoid racking up expensive interest charges.
Don’t use your entire line of credit.
Experts recommend using no more than 30% of your credit limit. This means, if you have a $3,000 line of credit, you shouldn’t carry a balance of more than $900 at any given time.
Avoid applying for additional credit unless absolutely necessary.
When you apply for new credit, it generates a hard inquiry and lowers your average age of accounts. Both of those actions negatively impact your credit score.
Use your card regularly to make small purchases.
Issuers like to see that you’re using your card, but that you’re also keeping your spending under control. Note that you don’t need to use your card at all to generate a credit report. As long as your account is open and you don’t make late payments, you’ll generate a positive payment history. However, the issuer may close your account if it is inactive. To avoid this, you can charge small, recurring transactions to your card, like monthly streaming or magazine subscriptions. Then, set up autopay to ensure you never miss a payment.