Edited by: Keri Stooksbury
& Kellie Jez
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If you’ve struggled with managing credit, you’re not alone. Maybe you succumbed to the barrage of incoming credit card offers during college and are still working to pay off the residual debt, or you were laid off from your job and struggled to make ends meet.
Regardless of the reason your credit history may be less than perfect, bad credit can hurt you in multiple facets of life. You’ll pay higher interest rates for credit and may be rejected when applying for credit, an apartment, a car loan, or even employment.
The good news is you can improve your credit score, and we’re here to help you start the process. We’ve compiled a collection of tips, resources, and card recommendations for those with bad credit who would like to get on the road to improvement. Let’s get started.
Experian defines bad (poor) credit as a credit score between 300 and 579 and a fair credit score as 580-669.
If you don’t know your credit score, finding out where you stand is the most crucial first step. If you’re in the 300-579 range, you might set an initial goal of improving your credit score to the “fair” range.
Beyond that, you can move up to a good, then excellent credit score and eventually reap the rewards these higher levels of credit give you.
You don’t have to pay to get your credit score, as there are plenty of ways to access it for free. Discover has a free credit score check tool, and you don’t need to be a customer to use it. Credit Karma (review) and Credit Sesame (review) are 2 other options for accessing your credit score without charge.
You can learn more about how to view your credit score for free and how your credit score is determined by checking out our expert guide. It’s also a good idea to review/monitor your credit score on a regular basis.
If you have bad credit, it can cost you in so many ways. You’re charged more for credit products, and getting back on track may seem like a daunting process. Bad credit can lead to:
Hot Tip: Bad credit doesn’t have to be permanent, and you can improve it incrementally over time. One of the best ways to improve your credit score is to prove you can manage credit again by opening a credit card and using it responsibly.
Getting a credit card and managing it well may seem like it’s easier said than done, but there are options available for rebuilding or building credit, and even small positive steps make a difference.
Did you know you can find out if there are credit card offers you may qualify for without having to apply formally? Credit card offers used to come in the mail, but now you can access these offers digitally on CardMatch.
The CardMatch tool is simple to use and doesn’t affect your credit score because there is no hard pull on your credit report. CardMatch works with credit card issuers who are looking for consumers that match with their credit card product offerings.
You merely need to enter your information and CardMatch will come up with all the credit card offers available for you from their partners.
There is another risk-free way to find out if you have any pre-qualified or pre-approved credit offers available. Many credit card issuers have a tool on their website where you can input your information to see if you have any offers available.
With bad credit, there won’t be many, if any, credit cards you’re pre-qualified or pre-approved for, but you risk nothing by completing the simple online forms and finding out. Your credit score will not be affected.
Hot Tip: Being pre-approved or pre-qualified does not guarantee approval for the credit card. It just means the credit card issuer has determined you might be a fit for their card. You’ll have to complete a formal credit card application to find out if you’re approved for the card.
Some of the credit card issuers with a pre-qualification or pre-approved option include:
To learn more about how to find out if you’re pre-qualified or pre-approved with any of these credit card issuers, check out our complete guide.
Credit card options for consumers with bad credit often have excessive processing fees and high annual fees like those that come with the Total Visa. And then there are secured cards, requiring a security deposit that may be held indefinitely.
Even with bad credit, you can find a card that will help you rebuild or build your credit history without being charged a high annual fee or excessive servicing fees.
When you’re seeking a credit card and your credit history is less than perfect, a secured card is an option that can help you get back on track. Secured cards typically require a refundable security deposit that is held by the credit card issuer to ensure you make your payments on time and manage the card well.
Secured credit cards can come with high annual fees and additional monthly service or processing fees, so it’s essential to select one that minimizes this extra expense.
Here are our recommendations for the best credit cards for bad credit.
The Capital One Platinum Secured Credit Card gives you the tools to control and build your credit with responsible use.
The Capital One Platinum Secured card is perfect for rebuilding or building your credit as it comes with no annual fee, the required security deposit can be less than comparable secured credit cards, and the security deposit can be spread out over several payments.
You probably didn’t think you could earn rewards with a secured credit card, but the Discover Secured card proves that you can have it all. This solid credit card offers benefits rarely seen with a secured credit card:
Building a credit card history with Discover can be beneficial, as they offer a portfolio of excellent rewards-earning credit cards you may want to apply for in the future.
If you are an active military member, former military, an eligible family member, or a cadet/midshipman, you can join the United Services Automobile Association (USAA) and have access to a wide range of financial resources including a fine profile of credit card options.
Qualifying military personnel can also apply for a secured credit card through the Navy Federal Credit Union. The Navy Federal nRewards card earns 1 point for every dollar spent and has no annual fee. A $200 security deposit is required to obtain the card.
Hot Tip: You can also check out these additional credit cards for active military.
The Milestone Mastercard® – $700 Credit Limit is targeted at people looking to establish their payment history. It is also widely accepted anywhere that accepts Mastercard, making it a good choice to help establish credit through your everyday purchases.
On the downside, it does have a low credit limit (with no chance to increase it), charges an annual fee, and has a high APR that can add up to big fees if you miss a payment or don’t pay off your balance in full each month.
However, if you can maintain a good payment record, this card might be a good choice to help you establish credit. This article will look at all of the reasons why the Milestone card can be a good card for you and also show you some alternative options.
If none of the secured credit cards work for you, you could consider the Milestone Gold card. Cardholders will receive the following benefits:
If you’ve managed your secured credit card wisely and established a positive relationship with the credit card issuer, you might be able to leverage that history and qualify for another, more rewarding, credit card.
It would be worth revisiting the CardMatch tool after establishing some history with your secured credit card to see if any new cards are available for you. Capital One, Discover, USAA, and Navy Federal Credit Union issue rewards-earning credit cards, so it’s also worth returning to those that have pre-approval options to see if new offers are awaiting you. There are also some instant-approval cards that require a lower credit score, but make sure you check your score beforehand to know where you stand.
If you were unable to qualify for any of the credit cards mentioned in this article, you can consider a prepaid card such as the PayPal Prepaid card.
A prepaid card can help you manage your finances, especially if you don’t have a bank account. You just load an amount when you obtain the card and then make purchases or bill payments as you would with a credit card.
The downside of prepaid cards is they don’t help build your credit, and they can come with a lot of fees including reloading, monthly maintenance, and withdrawal fees.
Hot Tip: Don’t miss our article on the easiest credit cards to get approved for.
For more information on how your credit score works, what determines a good or bad credit score, and tips for keeping your credit information safe, our experts have provided everything you need to know on these topics.
While there are limited choices for consumers with bad credit, there is a clear path for improving your credit and qualify for more rewarding credit cards.
Getting a secured card and managing it well will go a long way towards building or rebuilding your credit history. However, you’ll want to make sure you select a card with minimal fees, or the card can end up as an expensive choice.
Taking steps to improve your credit will reap the rewards with affordable credit and the greater benefits a good credit history can bring you.
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The information regarding the Discover it® Secured, USAA Secured Visa® Platinum Credit Card, Navy Federal nRewards® Secured Credit Card, and PayPal Prepaid Mastercard® was independently collected by Upgraded Points and not provided nor reviewed by the issuer.
The information regarding the Capital One Platinum Secured Credit Card was independently collected by Upgraded Points and not provided nor reviewed by the issuer.
Your credit report will not receive a hard credit pull when you use the Card Match tool. Credit card issuers work with Card Match to find consumers that match up with their credit card offerings.
You simply enter your information on the Card Match site and a list of any cards you might qualify for will be presented to you. Your credit score will not be impacted, so there is no risk in using the site.
No matter how many times you access your credit score, it will not hurt your credit. In fact, knowing your credit score is a good thing, so you should set credit score goals and check on your score regularly to see how it’s progressing.
Secured credit cards are different from regular credit cards because they require you to come up with a security deposit that is held by the credit card company while they extend you credit.
Many credit card issuers grant a credit limit for the card that is equal to the amount of your security deposit, but some may grant a larger limit depending on your credit history. Credit card issuers differ on refund rules, with options such as refunding after a certain number of years, after a number of on-time payments, or only when the credit card is closed.
Prepaid cards will not improve your credit because prepaid card issuers do not report activity on the card to any credit bureau. A prepaid card can be a convenient resource for managing your finances. However, it does not help you build credit. A secured card, if you can qualify, is a better option for building or rebuilding your credit.
While it’s an excellent idea to check your credit report, most sites that advertise a free credit report actually require you to sign up for paid credit services, so don’t be fooled. You can get a free credit report at Annual Credit Report.com, which is the only federally approved website to provide free credit reports.
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