Getting a Credit Card with Bad Credit

  • 4 min read

Here’s the catch: to rebuild your credit, you require a credit card, but how can you obtain a credit card with your bad credit? Many have found themselves in this fix after the recession and so you’re certainly not alone. When we experienced the great recession, many lost their jobs and default on their outstanding debt obligations. This lowered the credit score of many people. Fortunately, there are lenders ready to do business with you. Although issuers may not be aggressively targeting poor credit customers as they did some years ago, some of them still offer programs.

You have options

With a low credit score, your options will be fewer compared to someone with a great credit score. However, that doesn’t mean you can’t shop around. Certain cards come with higher interest rates or fees and you’ll need to find what suits your situation. You should start by checking your credit score and credit reports. You’ll see the factors that affect your credit score and come up with a way to get back on track.

For a credit score of 500 and lower

With a credit score of lower than 500, it may be tricky to qualify for a conventional card. This is because most lenders view this score as a high credit risk. A good option would be a secured credit card. In this case, you’ll be required to give a security deposit as collateral.

Typically, this may be equal to the card’s credit limit. The security deposit is a guarantee to your lender just in case you default. Secured cards come in various sizes and shapes and you should research well and shop around before choosing one.

For a credit score of 550

With a credit score of 550, you may experience difficulty in getting a traditional card.  If it is higher than 500, lenders will still consider you as high risk. Similar to those in lower 500s, you may need to go for a secured credit card initially.

For a credit score of 600

Once you hit 600s, you may apply for a conventional unsecured card with certain lenders. Generally, you will have more options than people in the 500s. However, you could still experience some obstacles as some lenders may consider you a high credit risk. Consequently, the cards you apply for may come with higher fees and interest rates.

For a credit score of 650

With a score of 650s, you can easily qualify for a card. However, this score still falls in the category of poor credit referred to as subprime and lenders consider it as ‘high risk’. This means you can anticipate higher interest rates as well as fees. You’ll need to show a positive payment history for your credit to improve. If this happens and you hit 700s, you’ll enjoy all the perks that come with having great credit.

Good credit is always a top consideration when credit card companies decide to issue credit cards to individuals.  They want to trust that applicants will successfully make their monthly payments on time and won’t default on the charges they make on the cards. After all, credit cards are just like loans because you are using money you don’t have to make purchases.

If someone has a good credit history then it means they have a history of successfully making payments on other outstanding loans and debts. Therefore, they are more likely to be successful in making their monthly payments towards this new credit card.

Good credit also determines how much credit you are issued. The higher your credit score, the more credit you will have available on your card.

Christopher - BSc, MBA

With over two decades of combined Big 5 Banking and Agency experience, Christopher launched Underbanked® to cut through the noise and complexity of financial information. Christopher has an MBA degree from McMaster University and BSc. from Western University in Canada.