Sometimes, credit gets the best of us. For those who are less financially savvy or who aren’t always on top of their credit bills, credit scores can take a hit. The problem with having bad credit, especially if it came from previously using credit cards, is that it makes using and owning a credit card or acquiring another credit card very difficult. Read on to learn more about the best credit cards.
For those who are trying to improve a bad credit rating, owning and responsibly managing a credit card can lead to an improvement in one’s credit score and an improvement in future financial standing.
If you don’t have the best credit score but are still in need of a credit card, the following guide will help steer you to the best credit cards for people with bad credit scores.
What is a bad credit score?
While there are different ratings for credit, the general rundown of credit ratings using the FICO credit rating system ranks bad credit at between 300-579 points and fair credit between 580-669. Good credit is rated at 670-739, while very good credit is 740-799 (and excellent is 800-850!).
How does one develop a bad credit score?
There are varying causes of bad credit. Bad credit can result from late payment of credit bills as well as only paying the bare minimum for a credit card bill. Late payment of loan repayments as well as defaulting on a loan or a credit card bill are also surefire ways to reduce your credit score.
Bankruptcy, foreclosure, and credit collection also negatively impact your credit score and can reduce the likelihood that you can acquire loans or other credit-based instruments. In some instances,
What are the effects of bad credit?
There are two main disadvantages of having bad credit. First, it makes it very difficult to acquire a loan for buying a car, or a home, or, in the case of starting a business, to fund business-related expenses. A FICO score of 620 or higher is usually required for a conventional home loan.
Further, whether with a loan or a credit card, those with poor credit will pay higher interest rates as an assurance that creditors will receive compensation for extending credit, which can lead to higher expenses for the person with bad credit. Credit card companies typically offer lower interest rates to those with good credit or better, indicated by a FICO score of 670 or higher.
Why use a credit card?
With a credit card and good credit history, it’s easier to get approved for larger loans. Credit cards offer further advantages, such as member bonuses or cashback programs based on satisfactory payments and achieving certain spending amounts.
Credit cards also offer certain convenience and, depending on the balance relative to the card, can allow business owners to withdraw enough funds to cover certain expenses rather than waiting and applying for a loan.
There is also a certain level of payment protection that credit cards offer. That being said, interest rates and the need to make timely payments often lead those with credit cards to accrue late payments or default on their cards, which makes a good situation not quite as good.
5 best credit cards for people with bad credit scores
Just because your past credit history hasn’t been so stellar doesn’t mean that you have to forgo using a credit card. There are a variety of credit cards that can accommodate those with FICO scores of 600 or lower. Let’s take a look at some of the best.
- The CapitalOne Platinum Secured credit card is a simple card for those trying to rebuild their credit. There is no annual fee and it requires a refundable annual deposit of between $49-200; higher deposits result in a higher credit line with the opportunity to earn back the deposit after consistent payments. Although the APR, or annual percentage rate, is 26.99% for interest payments, there are no hidden fees and after 6 months of consistent, timely payments, borrowers can be reviewed for a higher credit line. For a straightforward credit card to rebuild credit, it doesn’t get much better than this one.
2. The Discover it Secured credit card offers a similar format to CapitalOne’%26.99 APR, but can earn up to 2% back on up to $1,000 of gas and restaurant purchases each quarter; few other credit cards offer cash-back programs for those with bad credit. For those looking to use another simple card to rebuild credit that also offers cash-back opportunities, this card is hard to beat.
3. The Chime Credit Builder from Visa offers an even easier-to-use credit-building credit card without some of the perks of other cards. Users don’t require a minimum security deposit and don’t have any annual fees or interest rates.
Using this card does require signing up or already having a Chime Checking account. However, since this card doesn’t require a credit check, just about anyone looking to boost their credit can apply to use this secure and efficient credit card.
4. For those who are in the military or who have a relative (at least a grandparent or grandchild) who is a veteran or on active duty, the NFCU Rewards secured credit card offers a dynamic credit card option to help build credit.
While the card does require a starting security deposit, there’s no annual fee and an adjustable interest rate of 0-18%. Likewise, users earn 1 point for each dollar spent that can be redeemed for gifts or cash at a later date. With no foreign transaction fees, no cash advance fees, or balance transfer fees, this is a great card for those with a military connection and who wish to establish credit while abroad.
5. For international students studying in the US, the Deserve EDU Mastercard offers similar benefits to the other cards listed, with a 1% cash back on spending and no annual fee. Likewise, with no foreign transaction fee, no balance transfer fee, and no credit needed, this is a great card for those living in the US wishing to establish credit.
How to improve credit with your credit card
As these cards indicate, having bad credit doesn’t mean you can’t reestablish and improve your credit rating. With consistent payments in full, you can quickly improve your credit score and either progress to cards with lower interest rates or higher lines of credit, allowing you to get more from your card.
If you’re looking for the best cards for people with bad credit scores, there’s no reason to let your credit history stop you from scoring a great credit card.
