Your credit score is a big factor that goes into getting approved for any form of credit. Whether you’re trying to acquire a loan for that new house or you simply want a new credit card, the financial institution tends to do a credit check before it approves anything.
The reason for this is that the financial institution needs to be certain that it isn’t setting itself up for bad debt. You can think of it in the same manner that applying for a job works. How does the company tell that you’re an asset and that you can be trusted to complete the job for which you’re interviewing?
There’s no way of doing so reliably without looking into your past. Therefore, the company may do a background check and may call the references that you provide on your resume. After doing these checks, the company gets the assurance that it needs, and it can continue with the hiring process.
It works the same way with banks. Many people don’t handle credit card payments well, and that is the situation that the bank wants to avoid. While it can never tell exactly how the future should play out, credit history and a credit score check is a reliable way to ascertain the feasibility of providing a customer with a loan.
Bad Credit Is Not the End
When your credit is poor, it hampers your ability to access facilities such as credit cards, but it doesn’t mean that getting one is impossible.
There are many recommended credit cards for poor credit, which you can apply for to get the benefits of a credit card while you work on your credit score. Of course, such cards are not the ones that you see providing a laundry list of perks. In fact, the card is likely to be a very basic one.
That may be discouraging to you at first glance, but your priority needs to be getting a better credit score. Once you do so successfully, you can use your improved score to get another card with all the bells and whistles that you desire.
Consider Secured Cards
When you hear that you need to make an additional payment, you may shy away, but you should consider getting a secured card. When you do so, you are required to pay a security deposit. This deposit acts as a form of insurance for the card issuer. Therefore, there is less of a worry for the lending institution if you default on your payment.
You should note that you get the deposit back once you close or upgrade the account. Of course, this assumes that you have been making your payments as required.
Remember that banks want to lower the risk associated with credit cards. This is the reason for doing credit score checks in the first place. The deposit system acts as a safety net. This means that the risk is lowered, and your chance of getting such a card is better than your chance of getting a regular one. This doesn’t mean that you are automatically approved, but it does mean that the likelihood of approval is higher.
Top Credit Cards for Poor Credit
Below is an overview of some of the best cards that you can get your hands on even if your credit is poor. Remember to be mindful of the fact that getting the card is not the end of it. While you have the card, you need to place heavy importance on improving your credit score so that you can have more freedom to choose.
Capital One® Secured Mastercard®
This card requires you to make a minimum deposit of either $200, $99, or $49, which is refundable when you either close or upgrade the card. There is no annual fee, which means that you have one less expense to worry about.
This card does regular reporting to all three major credit bureaus, so once you’re responsible, your credit score improves in real-time. Once you use it responsibly, it tends to build your credit, which has positive implications for your future.
Once your security deposit is made, you get access to a credit line of $200. Should you deposit money before your account opens, you get access to an even greater line of credit. You can further improve this if your first five monthly payments are made on time.
The regular purchase APR is 26.99%, so your interest rate is not as bad as it can be with many other credit cards.
Merrick Bank Double Your Line™ Visa® Credit Card
While there is the possibility of accessing this card without an annual fee, you can end up with a fee of up to $70. The fee selected is calculated on an individual basis.
As you may know, hard inquiries, such as those done when you apply for a credit card, have a negative impact on your credit score. The number of points you lose is not many, but it’s best to lose no points at all. To this end, you can check if you’re pre-qualified for this card with no impact on your score. The best part is that the process takes less than a minute to complete.
This card provides you with a credit link range of $550 – $1,200. This figure can double, which means that the effective range can become $1,100 – $2,500. If you wish to double the line, you need to make at least your minimum payment on time for the first seven months that the account is open. There’s no process involved to get the increase once you make the payments, as it happens automatically.
You can track your score progressively, as you can see your updated FICO® score monthly. This helps you to make any adjustments you need to, as you work to build or rebuild your credit score.
There is protection from unauthorized charges with $0 fraud liability, and the card is a very forgiving one. This is because there is no penalty for late payment, nor is there a penalty for going over the limit.
Your regular purchase APR with this card falls within the range of 20.95% – 29.2%.
Fingerhut Credit Account Issued by WebBank
One of the standout features of this line of credit is the application process. While many other credit card applications take a considerable amount of time, the decision for this one can take only seconds.
This is another card that consistently reports to the three major credit card bureaus, which means that you have a platform to build your card history.
You can make item purchases from well-known brands as you enjoy a low monthly payment. In fact, you may end up paying no more than $7.99 monthly. Note that this is not an access card.
There is no annual fee to worry about, and your APR with this card is 29.99%
Merrick Bank Secured Visa® Credit Card
While your unsecured credit line may start low, there is always an opportunity for it to increase. Once the first year has passed, there are regular reviews to determine your eligibility for an increase. The best part about this is that there is no deposit required to access the increase.
Tracking your credit score is always important when you are trying to improve it. You get access to your FICO® each month, which helps you to know exactly where you stand and what changes you need to make. Additionally, your performance on this card is reported to all three major credit bureaus. Therefore, you can use your ownership of this card as the ultimate opportunity to build or rebuild your credit.
There is a flexible credit line that you can use to your advantage. An initial deposit determines the credit line that you start with. This credit line goes up to a maximum of $3,000. Should you wish to increase this at will, you can do so with additional deposits.
Easy funding options are accessible to help you fund your security deposit, and the card is acceptable worldwide since it’s a Visa® card.
Note that you can complete the entire application process online if you wish. The annual fee on this card is $36. Initially, you are billed for the $36 altogether, but after the first year, you are billed $3 monthly to cover it. Note that the APR for this card is 18.95%, which is one of the lowest available.
Green Dot Primor® Visa® Gold Secured Card
One of the standout features of this card is the incredible credit line range that it offers. It is a secured card, so a deposit is required; however, your credit line can range from $200 – $5,000.
The application process is very welcoming on two fronts. The first is that there are no application or processing fees. The second and more remarkable is that there is no credit score based requirement, which makes this card a perfect candidate as a credit card for poor credit. You can use it to rebuild your credit, though it isn’t necessarily difficult to acquire.
As is the case with other cards on this list, there is consistent reporting to all three major credit card bureaus, which means that you have the freedom and ability to improve your credit situation consistently.
The annual fee for this card is $49, and the interest rate is the lowest so far, as it is fixed at 9.99%. There is no penalty rate either, which is perfect for your situation.
Credit One Bank® Platinum Visa® with Cashback Rewards
Though there are conditions that apply, eligible purchases reward you with 1% cashback. There is a pre-qualification process that you can use to your advantage, and it only takes 60 seconds or less to complete.
There is a $0 fraud liability benefit here, so you are protected from unauthorized charges. Your line of credit is always up for review, and when favorable, you are rewarded with an increase.
Your monthly payment due date is your choice, which means that you get to pay based on what date is convenient for you. For added convenience, you can take advantage of the text and e-mail alerts.
The annual fee here ranges from $0 -$99, depending on your situation.