Best Credit Cards for Bad Credit (Yes, You Can Rebuild With These Cards)
If you have bad credit and want a credit card, not all is lost. While you won’t be approved for fancy rewards cards with tons of perks or the most competitive rates, there are options available for you. If you have no credit due to a lack of credit history, it’s possible to establish a credit score. If you use these options responsibly you may be able to build credit.
Many of these options are "secured" credit cards, which require a deposit. The deposit is used as your line of credit and also helps the lender lower their risk by having collateral to secure the card. If your credit could use some work, here are the six best credit cards for bad credit.
- Overview of the 6 best credit cards for bad credit
- Best credit cards for bad credit
- Best credit cards for bad credit summary
- What you need to know about your credit score
- What is considered bad credit?
- What is the difference between secured and unsecured cards?
- How can I improve my credit with a credit card?
- What should I consider when applying for a credit card for bad credit?
- How do you go from a secured card to an unsecured card?
- How long does it take to get a credit score if I have no credit history?
- Why you should use these credit cards for bad credit
- The bottom line
Overview of the 6 best credit cards for bad credit
|OpenSky® Secured Visa Credit Card||Building a credit history|
|Discover It Secured||No annual fee|
|Secured Mastercard from Capital One||Flexible deposit|
|Milestone Mastercard||Rebuilding credit after bankruptcy|
|Platinum Visa For Rebuilding Credit by Credit One||Cash back rewards|
|Indigo Platinum Mastercard||Unsecured card for bad credit|
Best credit cards for bad credit
OpenSky Secured Visa Credit Card
If you have bad credit because you missed a payment and are rebuilding credit, the OpenSky Secured Visa Credit Card is a good option to consider. The card is unique in that it doesn’t require any credit check to get approved. Typically when you apply for a credit card, there is a hard inquiry on your credit which may drop your credit score a bit. Using OpenSky you don’t have to worry about that.
Instead of a credit check, its secured card requires a deposit for approval, known as a prepaid card. The deposit is refundable and is used to establish your credit limit. So whatever you put down will be your credit limit. There is a minimum deposit of $200 but you may also be able to put down up to $3,000 upfront.
This card is good for rebuilding credit as it reports to all of the major credit bureaus. There are three credit bureaus, which include Experian, TransUnion, and Equifax. Not every lender reports to all of the credit bureaus, which can lead to discrepancies in your credit score. With OpenSky your credit activity will be reported.
If you avoid late payments and continue to make on-time payments, you can take the steps to rebuild credit. OpenSky is also a good option if you have no credit file or credit score. According to their site, cardholders who didn’t have a credit score were able to establish a credit score within six months.
There’s a lot to love about this card but it does have an annual fee: fairly low at $35 per year.
Discover It Secured
If you are looking to build credit from scratch and want to nix the annual fee, the Discover it Secured card is an attractive option. It has no annual fee and offers cash back, which is nearly unheard of for secured cards.
The card offers 1% cash back on all purchases and 2% of restaurant and gas purchases up to $1,000 each quarter. What’s even better is that Discover has a cashback match after the end of your first year. So. if you earned $100 in cash back, Discover will match it and you’ll have $200 total cash back.
As with most secured cards, your deposit acts as your line of credit. Discover has a minimum deposit of $200. Your payments — which are separate from your cash deposit — will be reported to all three credit bureaus so you can be on your way to building or rebuilding credit.
After eight months, you’ll be up for automatic review to see if you’re eligible to get your deposit refunded. Discover It also offers some perks like $0 Fraud Liability so if there are purchases on the card you didn’t make, you won't be liable for those expenses.
Secured Mastercard from Capital One
If you’re looking for a card with no annual fee and that has a flexible deposit option, the Secured Mastercard® from Capital One is a good one to consider. Many other secured credit cards have a minimum deposit of $200, but this card allows you to put a deposit of $49, $99, or $200 down. After making your initial minimum deposit, you’ll get access to a $200 credit line. If you want, you can deposit more money before your account opens to get an even higher credit limit.
After six months of being a cardholder, there’ll be an automatic review to see if you qualify for a higher credit limit. On top of having a flexible minimum deposit, this card also has flexible spending options. You can choose your due date to something that is convenient for you (such as after payday) as well as how you want to pay back your balance. You can pay online, by check, or at a local branch.
The Secured Mastercard® from Capital One also comes with numerous benefits. You get access to CreditWise from Capital One, which gives you a glimpse at your credit score. Cardholders also have $0 fraud protection in case your card is used without your authorization.
Plus, the card has a $0 annual fee and also has no foreign transaction fees, which means when you travel abroad you won’t get hit with additional fees. If there are any issues, you can reach customer service 24/7 or lock your card. To make payments easier, you can set up automatic payments.
If you want to rebuild credit and putting a security deposit is difficult, the Milestone Mastercard® is a go-to option. The card has no security deposit and you can see if you can pre-qualify without hurting your credit score.
Your monthly payments will be reported to each of the credit bureaus. If you’ve filed for bankruptcy or have poor credit because of missed or late payments, you may be able to get approved for the Milestone Mastercard®.
The card also gives you access to all Mastercard benefits such as fraud protection. So if you’re the victim of fraud, you won’t be responsible for the charges and you’ll be protected.
You can access your online account any time, 24/7, and make easy online payments. For people who have bad credit and can’t or don’t want to put down a security deposit, this is an attractive option.
Platinum Visa for rebuilding credit by Credit One
Credit One Bank offers the Platinum Visa For Rebuilding Credit card for people who are rebuilding credit. The annual fee on the card can range from $0 up to $99, depending on your creditworthiness. If your credit is on the lower end, you’ll likely have to pay an annual fee.
The card will check your account regularly to see if you’re eligible for a higher credit line. One of the unique perks of this card is that you can get cash rewards on your day-to-day spending. The card boasts 1% cash back on your groceries, gas, as well as your mobile, cable, and internet bill. Plus, you can earn even more when shopping at certain places. You can score up to 10% More Cash Back Rewards program when shopping at participating retailers and gas stations.
You also have the option to change your due date if the pay date you were given doesn’t work for you. Each month, you’ll also get access to your Experian credit score. The card has a mobile app which makes management easy.
Similar to other cards, it offers Zero Fraud Liability so you won’t be on the hook for payments you didn’t make if there is fraudulent activity on your account.
Indigo Platinum Mastercard
The Indigo Platinum Mastercard is an unsecured card for people who have less-than-great credit. So if you’re working on rebuilding credit, you may be eligible for the Indigo card. Because the card is unsecured, you don’t have to "secure" the card with a refundable security deposit.
Indigo's initial credit line won't be a lot. It may only be $300. And it has an annual fee for those with bad credit that could be as much as $99 that is immediately deducted from your credit limit, which means you have to pay that off right away or you'll pay interest on it. (And means you'll really only have a $200 credit limit to start.) But it is a real credit account and with responsible use you can get higher credit and a better credit score.
You can see if you pre-qualify on the Indigo website and not affect your credit at all. The Indigo card reports to all of the credit bureaus, which can help you rebuild credit or build a credit history.
Indigo also offers fraud protection to cardholders so you’re covered if anything happens to your card.
You can set up an account online and pay your bills and manage your account, which makes it convenient. One of the more fun qualities of the card is that you can choose your own image for your card.
Best credit cards for bad credit summary
| Name of card | Credit check | Secured deposit | Annual fee | | ---------- | ---------- | ---------- | ---------- | ---------- | | OpenSky Secured Visa Credit Card | No | $200 - $3,000 | $35 | | Discover It Secured | Yes | $200 | $0 | | Secured Mastercard from Capital One | Yes | $49, $99, or $200 | $0 | | Milestone Mastercard | Pre-qualify with no effect on credit | $0 | Cell | | Platinum Visa For Rebuilding Credit by Credit One | Yes | N/A | $0-$99 | | Indigo Platinum Mastercard | Yes | N/A | $59 - $99 |
What you need to know about your credit score
What is considered bad credit?
Credit is determined by your FICO score using your credit report. Bad credit ranges from 300 to 850. Bad credit is typically under 580. Fair credit, the next step up, ranges between 580 and 669. To reach good credit status, you'll need to have a FICO score of 670 or higher.
What is the difference between secured and unsecured cards?
A secured card requires collateral in the form of a cash deposit. The collateral secures the card and helps minimize risk for the lender when extending offers to people with less than ideal credit.
An unsecured card is a credit card that doesn’t require any collateral, so you do not need to put down a cash deposit. Traditional credit cards are unsecured and are geared for people with average to good credit. Secured cards that require a deposit are typically reserved for people who need to rebuild credit.
How can I improve my credit with a credit card?
If you get a credit card for bad credit, you probably want to know how to improve your credit. Using your credit card responsibly can help improve your credit and increase your FICO credit score. There are five different factors that affect your FICO credit score including:
- Payment history (35%)
- Amounts owed (30%)
- Length of credit history (15%)
- Credit mix (10%)
- New credit (10%)
Paying your monthly balance on time is the biggest factor if you are working to boost your credit. Secondly, you want to keep tabs on how much you’re charging. Your credit utilization, which is amounts owed, can affect your credit score. Credit utilization is the percentage of credit you are using. A good metric is to keep your credit utilization lower than 30%.
How long you’ve had credit is also a factor. After all, trust takes time to build and that is the same when working with lenders. Credit mix is about the different credit types you have such as installment loans (like a student loan) or revolving credit (like a credit card). Having a mix can be beneficial.
New credit is also a factor because if you’re constantly opening up new credit cards or taking out loans, it appears risky. So it’s important to be mindful of how often you’re applying for new credit.
Keeping these five points top of mind can help build credit. But simply paying on time and only charging a small amount on the card and paying it off in full will have the greatest impact on your credit score.
What should I consider when applying for a credit card for bad credit?
If you have bad credit, your options for credit cards may be limited. But it is possible to get credit cards, like secured cards, and other options specifically designed for those who are rebuilding credit. When comparing the options you have you want to consider several things like:
- Fees. Is there an annual fee or any other type of fee?
- Interest rate. What type of interest rates do they offer? Secured cards may have higher interest rates.
- Reporting to credit bureaus. Does the card report to all three credit bureaus, TransUnion, Experian, and Equifax?
- Fraud protection. What is covered and how are you protected?
- Managing credit. Do you get access to your credit score? Can you see if your credit is improving?
- Benefits. Do you get cash back and what percentage do you get? Are there additional perks that come with the card?
Comparing these various factors can help you decide which card is the right fit for you. Ultimately you want a card you can use and get the most out of to go with your lifestyle and to meet your financial goals.
How do you go from a secured card to an unsecured card?
Getting a secured card requires a deposit to establish a credit line. At some point, you want your deposit refunded and to graduate to an unsecured credit card. You will need to establish or boost your credit score first. If you pay on time and keep your credit utilization low, you can improve your credit over time. After 8 months to a year, you can reevaluate where you’re at. If your credit is in good shape you can talk to your credit card issuer to see if you can graduate to an unsecured card.
How long does it take to get a credit score if I have no credit history?
If you have no credit history, you might not even have a credit score. Without a credit score, it’s difficult to get approved for credit cards. As such, opting for a secured card with a deposit to secure it can be a good option.
After applying for a secured card and making a deposit, having several months of positive payment history can help. As noted above, some OpenSky cardholders stated they had a credit score after six months. To keep tabs on your credit, you can use the tools that might come with your card or use a site like Credit Karma.
Why you should use these credit cards for bad credit
The cards listed above are the best credit cards for bad credit because they have low to no annual fees and have various perks. Many secured credit cards don’t offer much in the form of available credit, credit card offers, or benefits like balance transfers, but among these options, you can get cash back on certain purchases and work on building credit.
These secured cards can be a gateway to rebuilding credit if your credit is shot. While secured cards are a great option, you want to work on improving your credit score and upgrading to a better card at some point. That way, you can get your money back and continue to build credit by using the card responsibly.
The bottom line
Having bad credit isn’t ideal but it’s not the end of the world. You can start with these credit cards to rebuild credit and increase your credit score. Once you do, you can graduate to the next level and get an unsecured card. In the meantime, you can take advantage of these cards’ perks and benefits, while having a convenient form of payment.
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