Can I get a credit card with bad credit?
October 26, 2023 9 min read
Having a poor credit history can be frustrating. It can make it more challenging to be approved for things like mortgages, car loans and—yes—credit cards.
But even if you have bad credit, there may be credit card options. And with responsible use, a credit card can help you reestablish your credit and improve your credit scores over time.
- Generally, a bad or poor credit score is anything below 600.
- Even if you have bad credit, it’s possible to get approved for a credit card.
- If you’re having trouble getting approved for a traditional credit card, a secured card might be an option.
- To improve your chances of approval, you can start developing responsible habits before you apply.
What does it mean to have bad credit?
Credit-scoring companies use different formulas, or models, to calculate credit scores. There are many different credit scores and scoring models. That means most people have more than one score out there.
For FICO®, any score below 580 qualifies as poor—its lowest score range. For VantageScore®, the lowest score range is very poor, from 300 to 499, and its poor credit score range is 500-600.
According to FICO, borrowers with a FICO score in a lower range tend to be viewed as a credit risk. But ultimately, decisions come down to each lender and the level of risk they’re comfortable with.
Credit scores can help lenders, like banks and credit card issuers, assess an applicant’s creditworthiness—that is, their ability to pay back credit and loans.
Do issuers offer credit cards to people with bad credit?
It’s possible to be approved for a credit card if your credit scores are on the low end. Credit products that don’t require good credit scores are sometimes known as subprime credit.
When used responsibly, subprime credit can be a useful tool for those looking to build or rebuild their credit.
Subprime vs. predatory lending
According to the U.S. Attorney’s Office, predatory lending happens when a lender uses “fraudulent, deceptive and unfair tactics” designed to benefit them if a borrower struggles.
Predatory lenders tend to target people with poor credit because they have fewer opportunities to shop around.
An example of predatory lending is asset-based lending. Lenders offer credit based on collateral, for example, home equity, instead of creditworthiness. That can result in customers borrowing more than they can realistically manage. And if the borrower defaults on the payments, the lender gains from the sale of the foreclosed home.
Laws against predatory lending
Federal laws like the Equal Credit Opportunity Act and the Truth in Lending Act are designed to protect borrowers from things like unfair interest rates and hidden fees. Some states also have their own laws to curb predatory lending.
You can contact your state consumer protection office to learn more. And if you think you’ve experienced predatory lending, you can submit a complaint with the Consumer Financial Protection Bureau (CFPB).
Types of credit cards for people with bad credit
Though you can be approved for a credit card with bad credit, your options may be limited. As you compare your options, keep in mind that some issuers may charge you higher interest rates or other fees if you have lower credit scores.
Secured credit cards
Secured cards function a lot like traditional, unsecured credit cards. The main difference is that secured cards require a security deposit, which the issuer holds as collateral. Because of the security deposit, people with bad credit may have an easier time getting approved for a secured card.
A secured card like the Capital One Platinum Secured Credit Card can be a great option for people who are establishing or rebuilding their credit.
Traditional, unsecured cards may also be an option. Unsecured means the card doesn’t require a deposit to open the account. They include different types of credit cards, like cash-back cards, travel cards and student cards.
Comparing offers and eligibility requirements before you apply for a credit card could help you find the right card to fit your needs. It could also help you avoid a card with higher fees and interest rates.
Secured vs. unsecured credit cards at a glance
Here’s a quick look at the main differences between a secured and an unsecured credit card.
Despite their differences, secured credit cards work like unsecured cards in several ways. You can use both types of cards to make purchases, and you’ll receive a statement at the end of the billing cycle. Be sure to pay on time and in full each month to avoid interest and late fees.
If you don’t initially qualify for an unsecured credit card, responsible use of a secured card may help you build credit. And that can make you a better candidate for things like mortgages, car loans and credit cards that offer rewards and other credit card perks.
How do I compare credit cards for bad credit?
When you’re evaluating which credit card may be right for you, here are a few things to consider:
1. Interest rates and fees
2. Credit reporting
If you’re using your card responsibly and making on-time payments, credit reporting may be one potential benefit of using a credit card instead of a prepaid or debit card. So if you’re considering a secured card, check that the issuer reports to all three major credit bureaus: Equifax®, Experian® and TransUnion®.
3. Upgrade options
As you rebuild your credit, your card issuer might allow you to upgrade your credit card. That could allow you to keep the account open, which may help you maintain a longer credit history.
4. Credit limit
If approved, those with poor credit may be offered lower credit limits than people with higher credit scores. Once you’ve established a history of on-time payments, you may be considered for a credit limit increase. There may be another option when it comes to secured cards. Some issuers allow cardholders to increase their credit lines if they deposit more than the minimum security deposit.
How do I improve my chances of getting a credit card with bad credit?
It takes time, but there are things you can do that might help you build credit and, in turn, improve your chances of getting approved.
1. Monitor your credit
To get a better idea of where your credit stands, consider using CreditWise from Capital One. CreditWise is free and available to everyone.
Even if you’re not a Capital One cardholder, you can use CreditWise to track changes to your TransUnion VantageScore 3.0 credit score. And checking your scores won’t hurt your credit. CreditWise can also help you monitor inquiries, delinquent accounts and more.
You can also use the CreditWise Simulator to understand the potential impact of your financial decisions—like applying for a credit card—before you make them. Knowing where your credit stands could help you avoid applying for cards you’re unlikely to be approved for.
2. Organize your finances and build a budget
Start by taking a look at things like cost-of-living expenses to help determine where your money goes each month. It’s another way to get a sense of which credit card may be right for you. For example, if a big portion of your monthly spending goes toward food and groceries, you could explore credit cards that offer additional rewards on those expenses.
You may not be in a position to get one immediately, but as you rebuild your credit, it could be a goal to work toward. Even if you don’t think you’re in a position to be approved for a particular card, you could make it a goal to apply after you’ve worked on improving your credit.
Having a sense of what you’re spending and saving can also help you create a budget and avoid living beyond your means. And being mindful of your finances and developing good habits can help you even after you get a credit card. That’s because using your card responsibly is one key to rebuilding credit.
3. Develop responsible credit habits
There are a number of good financial habits that you can start to develop even before you apply for a credit card.
- Think about how you’ll use a credit card: A good way to start might be to limit the use of your new card to a few specific expenses each month. That way, you can feel more confident that you’ll be able to pay it off in full, which the CFPB says is the ideal.
- Practice paying on time: Paying something like your utility or phone bill on time may not directly improve your credit, but if your goal is to get a credit card, paying on time is an especially important habit to develop. That’s because your payment history is an important factor when it comes to your credit scores.
- Don’t apply for too many cards at once: Once you’ve compared credit cards, consider how many applications you plan to submit. Credit-scoring formulas account for your recent activity. Hard inquiries from multiple credit card applications could reflect negatively on your situation.
- Stay well under your credit limit: If you’re approved for a credit card, it’s a good idea to be mindful of how close you are to your credit limit. Experts say not to use more than 30% of your total credit limit. A $500 credit limit would mean you should use no more than $150.
- Consider the age of your accounts: As the CFPB puts it: “Credit scores are based on experience over time.” The longer your credit reports show an ability to pay loans on time, the better it might be for your credit scores. Keep that in mind if you’re thinking about closing an older credit account.
Credit cards for bad credit in a nutshell
If you have a low credit score, you might find that your credit card options are limited. But finding a card that works for you and getting approved is still possible. And, as you take steps to build or repair your credit with responsible use, you may be able to upgrade your card.
If you’re ready to take a first step toward rebuilding your credit, you could check out the Capital One Platinum Secured Credit Card. Plus, get some tips for how to apply and improve your approval chances.