Getting approved for a credit card, especially if you have a poor credit score can be difficult. Mainly because most of the credit cards we see around us are made for people with Fair to Excellent credit. If your credit score falls below a 630 FICO you may need to do a lot more research and broaden the type of credit card you look for.
Most people will go straight to their local bank and apply. Or they see a banner on a website, offering a great card with rewards or cash back and apply. But they don’t read the fine print. These credit cards tend to require a credit score well above 670. Apply for these cards is a waste of time and will harm your credit score since they will pull your credit and leave a hard inquiry. But there are cards made specifically for people with poor credit.
These card are popular, but IMHO over rated. People get drawn in because of the ease of applying and the fact that they don’t have a security deposit required. While these cards are great for rebuilding credit, they have a few draw backs too.
- Easy to apply for
- Easy to get approved for – a poor credit score doesn’t mean you won’t get approved
- Credit limits tend to be small. Which makes maxing them out easy. A maxed out credit card means a lower credit score than you deserve!
- They tend to have a lot fees
- Interest rates tend to be higher
Regardless, unsecured poor credit credit cards have a place in the credit rebuilding process for some people. If used wisely, they can improve your credit dramatically. Click here to see a list of poor credit credit cards
Secured credit cards – The card of choice for rebuilding your credit
A secured credit card is a special type of credit card for bad credit. Approval for this account is not based on the applicant’s credit history so whether you have bad credit or no credit should not matter.
If you want to get a secured credit card, be prepared to submit a security deposit in cash. The amount can range from $200 to $5000, depending on your chosen card and issuer. If you would like to enjoy a higher credit line, then you need to be prepared to submit an equally high deposit as well. This is because the security deposit will be used by your credit card company as payment for your charges in case your account becomes delinquent or you fall behind your payments.
Apply for a prepaid debit card.
A prepaid debit card is another type of bad credit credit card which can also be used as a tool for rebuilding damaged credit history or a low credit score. This is because you can find issuers of debit cards today that report payments to the three major credit bureaus. Like a secured credit card, you are expected to submit an advanced payment upon opening your account.
However, unlike a secured credit card, the holder of a prepaid debit card is not provided with a credit line. That means, a debit cardholder does not have the option to submit payment at a later time or to carry over a balance from one month to the next.
All costs charged to the debit card will be automatically paid using the cash deposit in the cardholder’s account. When the cash balance runs out, the debit cardholder must make a new deposit to be able to use the card for other transactions.
Apply for a department store or gasoline station credit card.
This type of account is exclusively only to the department store or gasoline station that issued the credit card. That means, you can charge your department purchases to the card or refuel your car without paying in cash.
Usually, this type of credit cards are payable within a month. Furthermore, the cardholder is expected to pay the charges in full without leaving a balance. Although not your typical bad credit credit cards, a department store card or a gas station card can be used to raise a low credit score, rebuild poor credit, or establish credit history. The important thing is to make sure that your payments will be promptly reported to the three major credit reporting agencies for consumers (Experian, Equifax, TransUnion).