Card Options for Bad Credit
Times have changed since the credit crisis hit, and we're now facing a time of stricter regulations in the credit card industry. Those with bad credit and lower FICO credit scores may find themselves with fewer options at hand for financing. However, even if you're in this situation, there are always ways to shore up your credit so that you qualify for standard credit cards in the future: try using a secured credit card in this case. If you'd rather avoid racking up a balance, then use a debit card or prepaid card instead. You may qualify for one of the cards below even if your credit history is spotty.
Options For Cardholders With Bad Credit
Having bad credit is something that many Americans deal with on a daily basis. Bad credit is defined as having a FICO credit score of 620 or below (give or take) and is generally driven by a pattern of late payments, collections accounts, or even a bankruptcy or repossession. In many cases, people with bad credit have experienced a job loss, serious illness or have had business failures.
Having bad credit makes getting new credit, especially unsecured credit such as a new credit card, extremely difficult if not impossible in many cases. Some credit card companies specialize in offering standard credit cards to individuals with bad credit, though these are few and far between. The main drawback with these companies is that the interest rates are generally very high and the fees associated with maintaining the account are even higher. The good news is that there are some options for individuals with bad credit when it comes to opening a new credit card account. Here are a few ideas:
- Order your credit report. One of the first things you should do is to become acquainted with just how bad your credit actually is and how it got to this point in the first place. If late payments, collections accounts and too many maxed out/over the limit accounts are the problem, then it’s time to reevaluate your spending habits and scale back. Being responsible with your credit is the first step toward repairing it.
- Open a secured credit card account. A secured credit card account means that the credit card company has access to collateral which it can liquidate in the event that you default on your account. This collateral can come in the form of a savings account or tangible property. In most cases, the credit card issuer will require that you make a deposit into a savings account and will assign a credit limit that matches that deposit balance.
- Open a bad credit credit card. New credit card legislation has made it more difficult for credit card companies to charge some of the more outrageous fees that historically have made these cards something to stay far away from. With that being said, be prepared for the limits of these cards to be extremely low, in some cases, no more than a few hundred dollars. Also, the interest rates for these cards can be significantly higher than with other cards. However, these cards are also a great way to begin rebuilding your credit as many of them report to all the major credit bureaus.
Having bad credit is a huge barrier to creating a solid and secure financial future. The good news is that bad credit is not a permanent condition. With a little time and determination, even the worst credit can be repaired, putting you well on your way to getting better credit card deals and a sound financial future.
{ 4 comments… read them below or add one }
I’m interested to see the difference in prepaid credit cards between the UK credit card system and our US based credit system. Are we just the worst country when it comes to managing credit?
I have applied and have received a prepaid card, but have not activated it yet. Will I be charged any fees before activation? I do understand there’s an activation fee, and and possible a fee to use the card? But I do not want to be charged anything before even activating it. Just wanted to make sure.
Also, my credit is not so great, and I am looking for a credit card that I may be approved for? Do you happen to know if any that may be out there? I do appreciate it! Thank you in advance.
Mike
@UK Credit Card,
Seems like Europe and the U.S. are experiencing similar debt issues.
@Michael,
The terms and fee policies for prepaid cards vary per issuer. So I am not sure if they will charge you for activation. Perhaps you can give them a call to confirm? Also, you can check out our list of cards above for those with bad credit or use the selector on the left hand side of this page to search for cards that are best for those with limited or no credit.
Hope this helps!
@Michael,
I have credit issues also and am looking for a way to rebuild my credit. I just received about two weeks ago a First Premier Bank credit card, although you pay a $95.00 upfront fee because of the risk associated with the card and they charge $75.00 annual fee so with a $300.00 limit, so when the card is issued you have $225.00 available. You may want to check this card and see if they do report to the three major credit bureaus.