It may not be easy to get a credit card with bad credit, but the effort you put forth to do so will be worth it in the end. Good credit is the key to being able to buy a home or finance a car, after all. When your credit rises to the “very good” or “excellent” level (typically a FICO score of 740+), you’ll qualify for loans with the best interest rates and terms.
But how do you get a credit card with poor credit? It takes time and perseverance to get approved when you haven’t yet proven yourself, or if you’ve struggled with credit in the past, but it’s also hard to prove yourself when no one will give you a chance.
Still, you can get a credit card with bad credit if you’re willing to spend time fixing your credit first. Here are the most important steps you should take along the way.
Step 1: Find out how bad things really are
Your credit may be terrible, or you might just assume it is. Either way, you need to find out for sure. Gerri Detweiler, education director for Nav, a company that helps business owners build and monitor strong business credit for free, says step one is checking your credit score — but not just any credit score.
Specifically, Detweiler says you should strive to check your FICO 8 score — one of the many credit score types lenders use. Typically, this is the one card issuers check before approving people for a credit card, she says.
Seeing your FICO 8 score is “not crucial, but it’s helpful to see where you fall using this scoring system that card issuers actually use,” she says. Another option is checking a free credit score offered through your bank (if applicable) or signing up for a free account with a service like Credit Sesame or Credit Karma to see an estimate of your credit score there.
Step 2: Consider other credit factors
In addition to your credit score, Detweiler says card issuers want to make sure you don’t have an open bankruptcy. “If you have an open tax lien, that could also be a disqualifier,” she says. In either of these cases, a credit card might not be possible until the situation is far enough in the rearview mirror.
Another common reason you’ll get denied is the fact that issuers don’t want to see more than six inquiries within the last six months, according to Detweiler. If you’ve been applying for a bunch of cards, wait to apply again until all your current inquiries are more than six months old.
Also, many card issuers don’t want to see credit utilization higher than 60 percent — and they would prefer you have at least one credit card already.
“Most issuers want to see that you already have at least $500 or $1,000 in credit limits on other credit cards, which is a Catch-22,” says Detweiler. If you do have high credit card balances already, paying down some of your debt should help your case.
Step 3: Take a close look at secured credit cards
If you have checked your credit and know you can’t get approved for an unsecured credit card, you should consider getting a secured credit card. What’s the difference? Where unsecured credit cards extend a line of credit without collateral, secured credit cards require you to put down a cash deposit upfront.
This may not be ideal, but secured cards do report your credit movements to the three credit reporting agencies. Ultimately, this is what you want. If you decide to go this route, make sure you’re comparing secured cards to find an option with no annual fee, no ongoing fees, and other perks.
Step 4: Look into credit repair options
Detweiler says you can still work on your credit in other ways whether you get a secured credit card or not. “If you don’t feel confident trying to figure out what’s not accurate or complete on your credit report, then you could look into some inexpensive credit repair with an agency,” she says.