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Building and maintaining a strong credit score and profile is a long-term process grounded in good habits that include paying all bills in a timely manner while maintaining a low credit utilization ratio (the percentage of available credit that an individual actually borrows).
Unfortunately, for many well-intentioned American consumers, this is easier said than done. In fact, according to Experian, over 37% of American consumers have FICO scores that are below 670, positioning them as “subprime borrowers” who are likely to face rejection or unattractive interest rates and terms when applying for credit.
Though it is entirely possible to raise a credit score with a responsible payment history over time, it is also important for individuals with bad credit to become fully informed of the best credit cards available given their present situation. Let’s take a closer look.
Get Credit While Rebuilding Your Credit Score
If your credit score isn’t as strong as you would like as a result of missed payments, delinquencies, or even bankruptcy, the best time to get moving in the right direction is today. Fortunately, there are a number of reasonably attractive credit card options available to individuals with weaker credit scores who are in need of additional credit and the opportunity to rebuild a credit profile.
Read up on the options listed below for the card that best suits your needs, and be absolutely certain to use the card responsibly – keep your balances low while making timely payments every single month.
It is only through establishing a consistent track record of responsible payments that are reported to all three credit bureaus (Experian, Equifax and TransUnion) that your credit score and profile can improve over time. For further guidance, consult How To Build Credit on our website.
Secured Credit Cards
Secured credit cards are collaterally backed by a deposit made by the cardholder and function in a similar manner to traditional credit cards, with the deposit reducing the risk to the lender in the event that the cardholder defaults on a payment.
Secured credit cards are not “prepaid” cards – the deposit merely reduces risk to the lender who can draw upon it in the event that the cardholder misses a payment. The cardholder is still required to make minimum monthly payments – in fact, establishing a track record of consistent monthly payments is how people use a secured credit card to build credit.
The Secured Mastercard from Capital One comes with no annual fee and requires a security deposit as low as $49 to get started with a $200 credit line. Following five months of timely payments, cardholders become eligible for a credit line increase. Meantime, the DiscoverIt Secured card also doesn’t charge an annual fee, offers 2% cash back at restaurants and gas stations, and accepts deposits as low as $200 to get started.
Additionally, following an initial eight months of on-time payments, Discover reviews the individual’s overall credit profile and considers refunding the security deposit.
Best Unsecured Credit Cards for Bad Credit
The Credit One Bank Unsecured Visa with Cash Back Rewards is a popular choice, and with good reason. Apart from offering 1% cash back on everyday purchases such as gas and groceries, the pre-qualification feature within the application process prevents a premature “hard pull” on the applicant’s credit profile and any resultant negative impact on a credit score.
This card does often comes with an annual fee however, and it can range as high as $99. Though the Total Visa Unsecured Credit Card also comes with an annual fee and is capped at a $300 credit line, it can prove useful for building a responsible payment history over several months that will be reported to all three credit bureaus and help contribute to a higher credit score.
Best Credit Cards if You've Filed Bankruptcy
The Indigo Platinum Mastercard offers pre-qualification to applicants and won’t disqualify those with a previous bankruptcy. The card does often come with an annual fee as high as $99 and the APR is 23.9%, but using the card responsibly and making timely payments for several months will aid in rebuilding a credit score and allow the cardholder to move on to a more attractive rewards card with time.
A similar card to consider if you’ve already filed bankruptcy is the Milestone Gold Mastercard which also offers pre-qualification at similar terms to the Indigo Platinum Mastercard. It is important to start slowly with either of these cards, keep purchases small and try to pay balances in full each month to avoid the high interest expense associated with these options.