6 Steps to Getting a Credit Card When You Have Bad Credit

By Holly Johnson. Last updated 25 October 2018. 0 comments

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It may not be easy to get a credit card with bad credit, but the effort you put forth to do so will be worth it in the end. Good credit is the key to being able to buy a home or finance a car, after all. When your credit rises to the "very good" or "excellent" level (typically a FICO score of 740+), you'll qualify for loans with the best interest rates and terms.

But how do you get a credit card with poor credit? It takes time and perseverance to get approved when you haven't yet proven yourself, or if you've struggled with credit in the past, but it's also hard to prove yourself when no one will give you a chance.

Still, you can get a credit card with bad credit if you're willing to spend time fixing your credit first. Here are the most important steps you should take along the way.

Step 1: Find out how bad things really are

Your credit may be terrible, or you might just assume it is. Either way, you need to find out for sure. Gerri Detweiler, education director for Nav, a company that helps business owners build and monitor strong business credit for free, says step one is checking your credit score — but not just any credit score.

Specifically, Detweiler says you should strive to check your FICO 8 score — one of the many credit score types lenders use. Typically, this is the one card issuers check before approving people for a credit card, she says.

Seeing your FICO 8 score is "not crucial, but it's helpful to see where you fall using this scoring system that card issuers actually use," she says. Another option is checking a free credit score offered through your bank (if applicable) or signing up for a free account with a service like Credit Sesame or Credit Karma to see an estimate of your credit score there. (See also: I Checked My Credit Score in 11 Places — Here's What I Learned)

Step 2: Consider other credit factors

In addition to your credit score, Detweiler says card issuers want to make sure you don't have an open bankruptcy. "If you have an open tax lien, that could also be a disqualifier," she says. In either of these cases, a credit card might not be possible until the situation is far enough in the rearview mirror.

Another common reason you'll get denied is the fact that issuers don't want to see more than six inquiries within the last six months, according to Detweiler. If you've been applying for a bunch of cards, wait to apply again until all your current inquiries are more than six months old.

Also, many card issuers don't want to see credit utilization higher than 60 percent — and they would prefer you have at least one credit card already.

"Most issuers want to see that you already have at least $500 or $1,000 in credit limits on other credit cards, which is a Catch-22," says Detweiler. If you do have high credit card balances already, paying down some of your debt should help your case.

Step 3: Take a close look at secured credit cards

If you have checked your credit and know you can't get approved for an unsecured credit card, you should consider getting a secured credit card. What's the difference? Where unsecured credit cards extend a line of credit without collateral, secured credit cards require you to put down a cash deposit upfront.

This may not be ideal, but secured cards do report your credit movements to the three credit reporting agencies. Ultimately, this is what you want. If you decide to go this route, make sure you're comparing secured cards to find an option with no annual fee, no ongoing fees, and other perks.

Step 4: Look into credit repair options

Detweiler says you can still work on your credit in other ways whether you get a secured credit card or not. "If you don't feel confident trying to figure out what's not accurate or complete on your credit report, then you could look into some inexpensive credit repair with an agency," she says.

Once again, this is an area where you'll want to do your homework. Look for a credit repair company that is reputable, has good ratings, and has very low costs. Also read the fine print and ask questions so you know what you're getting into. Be aware of credit repair scams, as there are many out there.

Step 5: Get added as an authorized user

Another really good way to get a credit card with bad credit is to get added as an authorized user by someone you know well and trust who has a perfect payment history and low debt. "Maybe it's a relative, a friend, or a spouse," says Detweiler.

This isn't the same as getting your own card, but it can help improve your credit since the primary user's payments will be reported on your credit history as well.

If the primary user is worried you'll get in trouble using the card, you can also get added as an authorized user but never use the card or hold it in your possession. The benefit still exists since the main cardholder will continue using their card and making payments.

Detweiler says it may also be possible to get a co-signer for a credit card, although "most banks don't even do this anymore." Co-signing for a credit card may be seen as riskier for the person who needs help with their credit since both parties are jointly responsible for the debt either one charges. On the flip side, authorized users aren't responsible for repayment of debt.

Step 6: Consider alternatives

Finally, there are a few alternatives to consider. Detweiler says that, if the major card issuers aren't willing to accept you, you could try applying for a credit card with a credit union you have an existing relationship with.

Prepaid debit cards are another option, but "this isn't an ideal substitute for a credit card," says Detweiler. Not only do prepaid debit cards not help you build credit, but they don't offer many perks. For example, you'll have no ability to dispute purchases, fewer consumer protections, and more exposure in the case of fraudulent use. Prepaid debit cards may also have fees for transactions and deposits, so make sure to compare options if you sign up for one.

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