January 24, 2023|7 min read
January 24, 2023|7 min read
Having a poor credit history can be frustrating. It can make it more challenging to be approved for things like mortgages, car loans and—yes—credit cards.
But even if you have poor credit, there are credit card options for you. And with responsible use, a credit card can help you improve your credit scores over time.
Explore credit cards for people with bad credit, as well as tips for how toapply and improve your approval chances.
- What’s considered a “bad” credit score varies depending on who’s judging it.
- Even if you have bad credit, it’s possible to get approved for a credit card.
- If you’re having trouble getting approved for a traditional credit card, a secured card might be an option.
- To improve your chances of being approved for a credit card, you can start developing responsible habits even before you apply.
See if you’re pre-approved
Check for pre-approval offers with no risk to your credit score.Get started
What 'bad credit' means
Before you start looking into credit cards, it’s a good idea to understand yourcredit scoresand what’s meant by “bad” or “poor” credit.
Credit scores can help lenders, like banks and credit card companies, assess an applicant’s creditworthiness—that is, their ability to pay back credit and loans.
Scores come from companies like FICO® and VantageScore®. Using information fromcredit reports, those credit-scoring companies use mathematical formulas, called scoring models, to calculate credit scores.
Many scoring models produce acredit score rangeof 300-850. What each scoring model labels a“bad” or “poor” credit scorevaries slightly.
What FICO and VantageScore each consider a “poor” score varies slightly.
Lenders use credit scores to help them make lending decisions. But it’s important to bear in mind that each lender ultimately makes its own decisions based on individual strategy and the level of risk it’s comfortable with.
Credit cards for people with bad credit
It’s possible to be approved for a credit card even if your credit scores are on the low end, but your options may be limited. As you compare your options, keep in mind that some issuers may charge you higher interest rates or other fees if you have lower credit scores.
Secured credit cards
Secured cardsfunction a lot like traditional, unsecured credit cards. The main difference is that secured cards require a security deposit, which is a cash deposit that the issuer holds as collateral. Because of the security deposit, people with bad credit may have an easier time getting approved for asecured card.
A secured card like theCapital One Platinum Secured Credit Cardcan be a great option for people who are establishing, building or rebuilding their credit. And building credit through responsible use can make you a better candidate for things like mortgages, car loans and other credit cards.
Traditional, unsecured cards may also be an option. Comparing offers before you apply for a credit card could help you find the right card to fit your needs. It could also help you avoid a card with higher fees and interest rates.
Comparing credit cards for bad credit
When you’re evaluating which credit card may be right for you, here are a few things to consider:
- Interest rates and fees:Comparing theAPRof different cards is a good place to start. If you’re looking to improve your credit without spending a ton on fees, take note of other potential charges, such as annual, cash advance, late payment and balance transfer fees. If you’re an international traveler, be sure to check for foreign transaction fees as well.
- Credit reporting:If you’re using your card responsibly and making on-time payments, that reporting may be one potential benefit of using acredit card instead of a prepaidor debit card. So if you’re considering a secured card, check that the issuer reports to all three major credit bureaus—Equifax®, Experian® and TransUnion®.
- Upgrade options:As you rebuild your credit, your card issuer might allow you to graduate to a new card. That could allow you to keep the account open, which may help you maintain a longer credit history.
- Credit limit:If approved, those with poor credit may be offered lowercredit limitsthan people with higher credit scores. Once you’ve established a history of on-time payments, you may be considered for a credit limit increase.
Tips for building your credit and increasing your chances of getting approved
It takes time, but there are things you can do that might help you build credit and, in turn, improve your chances of getting approved.
1. Monitor your credit
To get a better idea of where your credit stands, consider using a tool likeCreditWise from Capital One. CreditWise is free and available to everyone. And checking your scores won’t hurt your rating.
Even if you’re not a Capital One cardholder, you can use CreditWise to track changes to your TransUnion VantageScore 3.0 credit score. CreditWise can also help you monitor inquiries, delinquent accounts and more.
You can also useCreditWiseto understand the potential impact of your financial decisions—like applying for a credit card—before you make them. Knowing where your credit stands could help you avoid applying for cards you’re unlikely to be approved for.
2. Organize your finances, and build a budget
Start by taking a look at things likecost-of-living expensesto help determine where your money goes each month. It’s another way to get a sense of what credit card may be right for you. For example, if a big portion of your monthly spending goes toward food and groceries, you could explore credit cards that offer additional rewards on those expenses. You may not be in a position to get one immediately; however, as you rebuild your credit, it could be a goal to work toward.
Even if you don’t think you’re in a position to be approved for a particular card, you could make it a goal to apply after you’ve worked on improving your credit.
Having a sense of what you’re spending and saving can also help you create a budget and avoid living beyond your means. And being mindful of your finances and developing good habits can help you even after you get a credit card. That’s because using your card responsibly isone key to rebuilding credit.
3. Develop responsible credit habits
There are a number of habits that you can start to develop even before you apply for a credit card.
- Think about how you’ll use a credit card:A good way to start might be to limit the use of your new card to a few specific expenses each month. That way, you can feel more confident that you’ll be able to pay it off in full—which theConsumer Financial Protection Bureau(CFPB) says is the ideal.
- Practice paying on time:Paying something like your utility or phone bill on time may not directly improve your credit, but if your goal is to get a credit card, paying on time is an especially important habit to develop. That’s because yourpayment historyis an important factor when it comes to your credit scores.
- Don’t apply for too many cards at once:Once you’ve compared credit cards, consider how many applications you plan to submit. Credit scoring formulas account for your recent activity. And multiplehard inquiriesfrom multiple credit card applications could reflect negatively on your situation.
- Stay well under your credit limit:If you’re approved for a credit card, it’s a good idea to be mindful of how close you are to your credit limit. Experts say not to use more than 30% of your total credit limit. A $500 credit limit would mean you should use no more than $150.
- Consider the age of your accounts:As the CFPB puts it: “Credit scores are based on experience over time.” The longer your credit reports show an ability to pay loans on time, the better it might be for your credit scores. Keep that in mind if you’re thinking about closing an older credit account.
Credit cards for bad credit in a nutshell
If you have a low credit score, you might find that your credit card options are limited. But finding a card that works for you and getting approved is still possible. Taking steps to build or repair your credit with responsible use can help.
Get started by reading thesetips for improving your credit scores. You can also check whether you’repre-approvedfor various cards. It’s quick and secure, and it won’t hurt your credit scores.
We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.
Capital One does not provide, endorse or guarantee any third-party product, service, information, or recommendation listed above. The third parties listed are solely responsible for their products and services, and all trademarks listed are the property of their respective owners.
Your CreditWise score is calculated using the TransUnion® VantageScore® 3.0 model, which is one of many credit scoring models. It may not be the same model your lender uses, but it can be one accurate measure of your credit health. The availability of the CreditWise tool depends on our ability to obtain your credit history from TransUnion. Some monitoring and alerts may not be available to you if the information you enter at enrollment does not match the information in your credit file at (or you do not have a file at) one or more consumer reporting agencies.
January 24, 2023|7 min read
Money ManagementHow to get approved for a credit card
article|November 24, 2020|6 min read
Money ManagementWhat is a bad credit score?
article|January 21, 2021|8 min read
Money ManagementHow to improve your credit scores: 7 tips that can help
article|January 5, 2023|5 min read