Sometimes life hits you hard, and takes a toll on your credit score, or maybe you just made some mistakes in the past and want to figure out how to fix them. Regardless, having bad credit can really impact your life, aspirations, and goals, but there are ways to improve your overall credit score. One way is to apply for a credit card that is specifically designed for individuals with bad credit.
What Happens When You Have Bad Credit?
Your credit score is reflection of your borrowing history and is expressed as a 3-digit number between 300-850. The lower the score, the worse it is, and the less likely lenders like banks or insurance companies will want to offer you a line of credit. If your credit score drops too low, you’ll be subject to higher payments and higher interest rates on your mortgages, car or business loans, etc. Certain employers or property managers may also run a credit check on you to see if you are a trustworthy applicant.
It’s crucial to keep an eye on your credit score, since it can play a huge role in your life. You want to be regularly checking your score and understand how to improve your credit at all times. However, if your credit score does drop too low, you should know that there are ways to build it back up.
How Credit Cards Can Help You?
Credit cards are a great way to improve your credit score. By opening a new credit card, you’ll get the opportunity to start writing your payment history. If you are responsible and pay your bills on time, lenders will take note of that on your payment history, which will lead to more favorable credit terms in the future. The longer and healthier your payment history is, the higher your credit score will be.
A new credit card will also increase your total credit limit. Your Credit Utilization Ratio is the total amount of debt you owe divided by your total credit limit. For example, if you have a balance of $1000 on one credit card that has a limit of $5000, your Credit Utilization Ratio is 20%. Say you open up a new credit card that also has a limit of $5000. Your new credit limit is now $10,000 and you still only have a balance of $1000 that hasn’t been paid. Your new Credit Utilization Ratio is now 10%, and the lower the ratio, the better it is for your credit score since it shows that you are responsible at managing your credit by not overspending and regularly paying off debt.
What To Look For When Applying?
There are many credit cards out there that are available to people with bad credit scores. With that in mind, it’s important to consider the following when doing your research on which credit card to apply for if you have a poor credit score.
1. No Required Credit History
There are quite a few credit cards out there that don’t require any previous credit history,or if you have a few negative marks on your credit score. Check to see if the card you’re interested in requires previous credit history.
Our Pick: Open Sky® Secured Visa® Credit Card
The great thing about this card is that it doesn’t require a credit check when you apply, meaning that it is designed for all people with any credit background. Although, you will have to meet certain income requirements. This card also doesn’t require that you have a bank account, and allows you to pay your bills via money order, check, wire transfer, or debit card.
2.Allows Previous Bankruptcies
A lot of credit cards will often reject you if you have declared any bankruptcies in the past, but there are cards out there that do allow previous bankruptcies. If you have a previous bankruptcy, be sure to check if the card you want to apply for allows them.
Our Pick: Indigo® Platinum Mastercard®
The Indigo Platinum Mastercard is a great card with a fast and easy application process,and the best perk is that it allows applicants who have previously filed for bankruptcies. Bankruptcies can stay on your credit history for up to 10 years, so it can be problematic for anyone looking to improve their credit score with credit cards. This card is for anyone with limited credit options.
3.Allows Refundable Security Deposits
Some credit cards out there will let you place a refundable deposit down in order to establish a new line of credit. The amount of the deposit depends on your credit worthiness. You’ll be able to get your deposit back depending on how responsible you are when using your new credit card.
Our Pick: Discover It® Secured
This card lets you establish your credit line by placing a security deposit between $200-$2500. The more you put down, the higher your credit limit will be. After 8 months of having the card, the bank will consider transitioning you to an unsecured line of credit and return your security deposit based on your payment history. There is no annual fee and you receive 2% back at restaurants and gas, 1% back on all other purchases.
A low credit score shouldn’t be your financial doom. Keep in mind that you do have options to apply for specific credit cards that are designed to help individuals with poor credit scores. Be sure to take your time to research which credit card is the best for your current credit situation, and then apply to start getting your credit back on track.
Resources:
1. https://www.thesimpledollar.com/credit-cards/bad-credit/best-credit-cards-for-bad-credit/
2. https://wallethub.com/credit-cards/bad-credit/
3. https://www.nerdwallet.com/best/credit-cards/bad-credit
4. https://www.cardrates.com/advice/guaranteed-approval-credit-cards/
