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Unsecured credit cards for bad credit
Compare unsecured credit cards for bad credit
Bad credit? Maybe you hit hard times. Or maybe you just had way too much fun in the past and are paying for it now. Either way, you can improve your credit situation. If you’ve been turned down for a credit card from your bank and other popular card companies, you may benefit from looking to establish your credit using secured or unsecured credit cards for bad credit scores.
The terms are not great (as the name implies), and you may be required to get a secured card to start, but if you have a credit score between 300-600, then here are a few cards along with tips to help you rebuild your credit.
Cards for bad credit compared
We looked at dozens of credit card options and picked three that service people with bad credit:
When reviewing these credit cards, we compared interest rates, one-time fees, annual fees, monthly fees and grace periods. If you plan to accept a card offer, carefully read the fine print that may spell out other types of charges such as late fees, penalty rates, cash-advance fees, credit limit increase fees, and more that you’ll want to try to avoid.
|Annual Fee||$75 first year, $48 after|
|Monthly Fee||$0 first year, $8.25 after|
|One-time Fee||up to $95|
|Grace Period||21+ days|
|Annual Fee||$0-$99 first year, $99 after|
|Grace Period||25 days|
|Annual Fee||$75 first year, $48 after|
|Monthly Fee||$0 first year, $8.25 after|
|Grace Period||21+ days|
How are these credit cards different?
Secured or unsecured credit cards for bad credit do not come with the best terms as you might expect. If you acquire one of these cards, use them carefully until you can get a card with better terms. Besides a higher interest rate, they may also charge you,
- A one-time “program” fee
- A monthly fee
- An annual fee
They may deduct these fees from your available credit balance, which can quickly deplete your available credit line.
For example, if your credit balance is $300 and you have to pay a $99 annual fee, your balance is already down to $201 before you even use the card.
If this is the case, it is best to pay off the $99 balance within the grace period to help keep your debt to available credit ratio low.
If you are a student, you may want to consider a credit card for students.
How to get a credit card when you have bad credit
- Apply to one of the above cards or look for a card that advertises “bad credit” or “rebuilding” credit.
- Like most credit applications, you’ll need to fill out an application with your contact information, Social Security number and job information.
- Your credit will be checked.
- If it’s a secured card, you’ll need to make a deposit from your bank account or prepaid card. Sometimes they want this ahead of approval, but if you are not approved, then they’ll refund it.
- Get approved!
If you can not obtain credit approval, you may be able to work on your credit by getting a secured credit card or co-signer.
• Bad/Fair cards
Some credit card companies offer card options that can help you build or rebuild your credit.
These credit cards may not have the best terms, but if you use them carefully, you can improve your credit.
Once your credit is improved, you can apply for a card with better terms in the future. In the meantime, a secured credit card may be your best option.
• Unsecured vs. secured cards
Unsecured credit cards for bad credit don’t require you to fund it or “pay a deposit” to get it. A secured credit card requires you to pay the creditor a deposit before they extend credit to you.
For example, if you pay $500 towards a secured credit card, your credit limit is $500. The credit card company holds your $500 to ensure that they will receive payment from you should you default.
If this is the only kind of card you can get, you can start to build your credit by charging small amounts to the card and paying it off monthly. Eventually, you should be able to clean up your credit enough to qualify for an unsecured card.
If you have a generous friend or family member with good credit, you may be able to convince them to cosign on an unsecured credit card. A co-signer will help you get a credit card and with a more favorable interest rate and possibly lower fees.
No matter which card you get, paying your bills on time every month will help slowly improve your credit report and move past mistakes of the past.
A good time to begin building or rebuilding your credit is after you obtain a steady income with enough extra to start making regular credit payments.
Pay special attention to late fees and penalties, so you don’t get dinged. Some may even raise your interest rate if you make a late payment! Penalties are easy to miss, and fees can escalate quickly, so be careful.
“I think that a lot of the small print that people miss is that if you do not pay your card as you should, they can ask for the entire amount of money upfront, or increase your interest, so you are paying more back to them. When you get a credit card, you have to be able to make sure that you can pay it off in the right time that it should be. Otherwise, you will be in a sticky situation.”
— Ethan Taub, CEO, www.loanry.com
What is “bad credit?”
Having a bad credit score isn’t the end of the world, as long as you work toward improving it.
But generally, a bad credit score is under 580. You may have a low credit score because you missed payments, owe too much, or have bills in collections.
Some creditors are not as lenient and may consider scores in the 600s to be “fair” or bad. The creditor usually decides what credit score they will accept from their applicants. If you don’t know your current credit score, you can check your credit score for free via the three reporting agencies.
Guaranteed approval credit cards for bad credit
You may have heard of these types of cards; however, there is no such thing as a “guaranteed approval” credit card. Most credit card providers will need you to show proof of income and perhaps a valid Social Security number. In most cases, when someone refers to bad credit credit cards guaranteed approval, they are referring to secured cards.
If your credit score is over 650 and you have a steady income, you may get the best terms by first applying for a credit card through your bank or credit union.
If you are turned down, or already know you have bad credit, then consider a card specifically designed for those with bad credit. With careful use, you may raise your credit score and improve your credit situation.
How to raise your credit score with a credit card
Responsible use of a credit card can be a fast path to building your credit history. Here are some guidelines to help:
- Use your card. Use your credit card regularly and pay your bill before the due date.
- Don’t spend more than you can pay off each month. Maxing your card out will hurt your credit utilization score. Target for below 30% if you can’t pay off your balance each month. But the goal, at this point in your credit history building should be to keep your balance low.
- Pay in full and on-time. Paying on-time is crucial to keeping your credit score healthy, not to mention late fees. Paying in full will help you avoid expensive interest rates.
- Don’t close accounts. The age of accounts is a factor in your credit score. So keep them open unless there’s a compelling reason, like an annual fee on a card you don’t use.
- Keep a close eye on your progress. Keep close tabs on your credit score an credit reports. If you don’t see positive changes you may want to consider other issues that may be holding you back.
Security deposit cards to avoid
A lot of securit deposit cards marketed to people with bad credit can be very expensive. Aside from the security deposit required, look carefully at the number and amount of fees, such as:
- Application fees
- Annual fees
- Processing fees
- Maintenance fees
- Membership fees
- Activation fees
- And the list goes on…
When you start adding these fees up just for the privilege of ‘getting’ to use their card it doesn’t really add up to being worth it. And unlike a security deposit, you’ll never get these fees back.
Others ways to improve your credit score
There are lots of other ways to improve your credit score and build credit history. Attacking the problem from a few different angles will get your credit score higher faster, and we like that!
Pay off past due bills
Any past due accounts – make it your priority to pay them off as soon as possible and keep them paid on time moving forward.
Check your credit report for errors
Credit report errors may be dragging your score down. Dispute errors or work out how to resolve lingering problems with creditors.
Get your credit utilization score to 30% or below
Pay down credit card balance as much as you can. You’ll increase your utilization score and save yourself a ton of money on high interest.
Keep old accounts open
When you’re working on fixing your credit, a natural impulse may be to close an account once you have it paid off. But older accounts are better for your credit and having access to credit that you don’t use improves your utilization score.
Consolidate credit card debt onto a personal loan
Personal loans are considered “good debt” – if you can qualify for one it will help your credit score and saving you money on interest.
Report positive rent payments
Find a company that reports your on-time, positive rent payments. Find out more about rent reporting to build credit history.
Get a side gig
Sometimes you just need a little more money to pay down your debts, or to pay them on time, taking on a side gig until you get your finances where you want them to be may be just the thing. Check out some suggestions here for making some extra money on the side.
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