Is there any Credit Card for Bad Credit?
Yes, there are credit cards for bad credit, typically, a "bad credit" FICO score is under 580 out of a range of 300-850, with 850 being the best. A poor score would be below 550. To get an excellent rating, you'll want to aim for at least 700. A few short months of good consumer behavior is all it takes to improve your score.
How you handle your credit over the years determines bad credit. Your credit may not be great if you have missed out on payments. On-time payments (35% of your score), how much you owe compared to how much credit you have available (30% of your score) are the two most important components of your FICO score. It means that late payment is likely the most important cause of your poor credit. A high balance on the credit cards can be a heavyweight as well.
How many people have bad credit?
Credit bureau Experian studied data and found that 17% of consumers have bad credit. More than one-third of the population has what lenders call a subprime score, which includes the fair and poor categories. On the other hand, Americans with exceptional scores constitute 19.9% of the population.
Do you have poor credit? Rebuild your credit and improve your score with some of these credit cards that are designed to help you. Improve your credit report each month by paying on time and keeping a low balance.
Here are a few credit card options that are best suited for poor or bad credit in the USA.
- Discover it® Secured: No annual fees, earn 1% unlimited cash back on every purchase, and it will help you build your credit standing with responsible usage.
- Capital One® Secured Mastercard®: No annual fees, no cash back, miles, or points. Initially, a $200 credit line is given for a security deposit of $49, $99, or $200 based on your creditworthiness.
- Total Visa® Unsecured Credit Card: You need a checking account for this card. The application process is fast and easy; response provided in seconds. No cash back, miles, or points. It is a genuine VISA card accepted by merchants nationwide across the USA and online. Monthly payments are manageable. With this you can overcome your bad credit.
- Citi® Secured Mastercard®: No annual fee required. It helps build a credit history with monthly notifications to the credit bureaus. A security deposit of minimum $200 is required for this product. Pay your bills on time every month to avoid damaging your credit with auto pay, online Bill Pay and alerts. Mastercard® is accepted worldwide.
- First PREMIER® Bank Mastercard® Credit Card: You need a checking account. Make your payments on time every month and keep balance low to the credit limit.
- Discover it® Student Cash Back: It is the best credit card specifically for students with a limited credit history. No annual fee required. Earn unlimited 1% cash back on all other purchases automatically and 5% cash back each quarter at different places like grocery stores, gas stations, restaurants or Amazon.com up to the quarterly maximum each time you activate.
- Capital One® Secured Mastercard®: Ideal card for bad credit with low-security deposit. No annual fee is required. It builds credit when used responsibly. You get an initial $200 credit line after making a security deposit of $49, $99, or $200 determined based on your creditworthiness.
- Savings Secured Visa Platinum Card: Ideal credit card for bad credit for low APR. No annual fee is required. No income verification or foreign transaction fees is required. There is a 25-day grace period on purchases.
- AeroMexico Visa Secured Card: Ideal for bad credit plus miles. The annual fee is $25, double miles on gas and groceries, one mile per $1 spent on eligible net purchases, 3,500 first use bonus miles along with a complimentary companion certificate, $99 companion certificate with renewal, and complimentary baggage.
- Surge Mastercard Credit Card: A checking account is required. All credit types whether bad or poor are welcome to apply. Initial credit limit of $500.00 (subject to available credit), the application process is fast and easy with results in seconds. Use your card at locations anywhere that Mastercard® is accepted. Free online account access 24/7.
- Credit One Bank® Visa® Credit Card: The annual fee is $0-$99. Get 1% cash back rewards on eligible purchases such as groceries, gas, and services such as bills like internet, mobile phone, cable, and satellite TV, terms and conditions apply.
- Credit One Bank® Unsecured Visa® with Cash Back Rewards: Annual fee required is $0-$99. You are eligible for 1% cash back rewards on purchases such as groceries, gas, and services such as internet, mobile phone, cable, and satellite TV, terms and conditions apply.
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The criteria or the methodology that must be used to come to the conclusion as to which credit cards are the best credit cards for bad credit is as follows:
- If any deposit is required – Some secured cards need a refundable deposit, sometimes starting as low as $49.
- Some cards like the Capital One Secured Mastercard have few hidden fees, while the others have fees for seemingly everything you do include charges for copies of documents.
- Not all cards for bad credit charge annual fees, which is a huge bonus provided there are no other hidden fees.
- Regular APR should be paid if you carry a balance.
- Another criteria which needs to be considered is the number of other annual percentage rates (APRs) for balance transfers, cash advances, and fees such as for cash advances and late payments.
- Some of the Discover products offer 100% U.S.-based customer service. Most offer online apps and services.
- Some cards offer the ability to improve your credit line and may grant you a higher credit line after your first few monthly payments are paid on a timely basis.
- Some cards provide you with the tools to track the credit score. Some cards grant you a monthly or quarterly access to your FICO score.
- A few cards such as the Discover it Secured card offer rewards rates on everyday spending like on groceries, gas stations, and restaurants.
- Cards are required by law to provide security and protect you from fraud. Many cards offer other safety features such as Discover's tracking of your Social Security number on the dark web.
- Some of the miscellaneous benefits, which are not common among cards for bad credit are free checked luggage, access to airport lounges, travel credits and more. Some cards for bad credit provide benefits such as extended warranty protection and no foreign transaction fee.
What kind of credit cards must one avoid in case of a bad credit?
The above-mentioned credit cards are a selection of the best card choices available for bad credit and to improve your credit score. When you have poor or bad credit and you track record is not good with your finances, then it is highly recommended to avoid the following cards:
- Avoid balance transfer cards. Get a handle on your budget, pay more than the minimum and do not add more debt to your card than you already can.
- It is highly recommended to avoid cards with high annual fees. Do not be tempted with an annual credit, liberal ongoing rewards, and other goodies. Because of limited cash output, you will be unable to take full advantage of the card's features.
- Avoid cards that require high credit scores.
- Avoid cards that require a high initial spend. As tempting as a 50,000-point sign-up bonus may sound, it will require un-affordable spending with money that you don’t have.
What's in a credit score? There are actually more credit scores than fingers or toes, but there is no need to worry. There are more than a dozen credit scores for each credit bureau, many for different industries like mortgage, auto, and credit cards. But the scores you should be worried about are the consumer versions available to you through VantageScore and FICO.
The most valuable aspect of the VantageScore and FICO scoring model is payment history, which makes up about 35% of your score. That is why it is so important that you pay your bills on a timely basis each month. The scoring models care only about whether:
- Paying on time is the most important element of your credit score. It takes months and even years to build your credit. One missed payment can lead to a drop in your score quickly.
- Keep your balances low? Both the scoring models VantageScore and FICO want to keep your balances low.
- Credit scores prefer a long history of credit.
- Avoid applying for multiple cards in a short amount of time because it has a negative impact on your score.
- One important way to give your score a little boost is to take out a small installment loan like a car loan or a credit-builder loan.
Factors credit bureaus consider to improve credit score: Your creditworthiness is not assessed by credit bureaus, but it is assessed by your credit scores. The accumulation of credit behavior over the last 7-10 years comprises of your credit report. A measurement of the data from the credit report is your credit score.
The three major credit bureaus such as TransUnion, Experian and Equifax are where your credit data is sent by lenders. A report is generated by each bureau, which is inclusive of personal information like your name and past addresses, your accounts, and whether your bills are paid on a timely basis.
Credit score models VantageScore and FICO use a formula with 5-6 major components including a debt-to-available-credit ratio, on-time payments, and other credit habits, which is collected from the credit reports.
How to Improve your Credit Score: Are you ready to build your credit score? It only takes a few months to increase your score if you do it the right way. On a scale of 300-850, if your score is at about 700, your credit card options will open up considerably. So, follow these steps:
- First things first check your credit reports for any errors. Check the credit reports of the 3 major credit bureaus for any inaccuracies or mistakes, which is a sign that your credit has been highjacked.
- Check your credit score as you can assess which credit cards or lending products you qualify for.
- The fastest and easiest way to build credit is by taking out a credit card and by using it regularly every month
- Avoid applying for multiple cards as your credit takes a temporary, small hit every time you apply. You don’t want to send the wrong signal to lenders that you are desperate for cash.
- Avoid the risk of having your account closed for inactivity, put a small charge on it each month.
- The single most important thing you can do with your credit card is to ensure your score keeps climbing.
- Build a mix of credit by giving your credit an extra boost. Consider taking an installment loan like a credit-builder loan. Car loans and mortgages are the most common types of installment loans.
Conclusion: You are not alone if you think that you will never get out of debt. In fact, there are many people who are pretty unenthusiastic about paying off their debt. According to a study, it was found that two-thirds of consumers believe that they will never be able to pay off their debt and this number keeps on going up the older we get.
But you do not have to be among the few who are hopeless about paying off their debt. If you have missed payments or gotten in over your head, it is time to own up and take the initiative to call your credit card issuer. The bottom line is that you are ultimately responsible for the debt you have incurred. You spent the money and now you need to make things right with a few smart decisions.