Getting authorized for a credit card can be challenging if you have a bad credit score. Even if your request for a credit card is denied, the credit check reductions that come with any request may harm your credit score. We have compiled a list of the top 3 credit cards to rebuild credit. However, some options for individuals with low credit scores still exist to get credit.
We have compiled a list of some top credit card suggestions for “subprime” borrowers and created a guide to assist you in navigating the process of gaining approval for a secured or unsecured credit card while having bad credit.
How to Rebuild Credit for Bad Credit?
To build credit, if you have bad credit, you may have two types of credit cards to apply for:
- a secured card (where you place a security deposit equivalent to the amount of credit you’re using) or
- an unsecured credit card for people who have low credit scores.
Which Credit Option Is Better to Choose to Rebuild Credit with Bad Credit?
Suppose the prospect of making a deposit makes you feel uncomfortable. In that case, you must know that many unsecured credit cards for individuals with poor credit come with many fees and very high annual percentage rates.
And if you opt for a secured card, try your best to select one that reports to all three major credit agencies so that your timely payments may start boosting your score as soon as possible.
Regardless of your option, it would help if you made it your goal to use the new line of credit as a stepping stone toward a higher credit profile. This will allow you to qualify for better cards and rates on your other loans.
Top Credit Cards to Rebuild Credit For Bad Credit:
This may be the best option if a person has solid finances but no credit history in the U.S. The company determines your eligibility by analyzing your income and other financial factors.
Rewards: Earn 1% cash back on all purchases qualified for prizes.
Welcome, offer: This card does not come with a welcome bonus.
The annual Fee is Zero.
Other Advantages and Disadvantages: Tomo’s approval procedure requires you to link your bank account for weekly auto-payment of your bill, making it more similar to a debit card than a credit card. However, you will not be subject to interest charges because you make weekly payments. To register for the card, you need a legitimate SSN or ITIN and a legal government-issued ID; however, you are not required to be a U.S. citizen.
2. Discover it® Secure Credit Card.
The Discover it® Secured Credit Card offers an excellent mix of features for people wishing to establish credit. The card has no annual charge and offers incentives in addition.
Rewards: Earn 2% cash back on more than $1,000 in total gas station and restaurant purchases each quarter. Additionally, receive an unlimited 1% cash back on any other purchases.
Welcome Offer: Discover will double your first year’s cash-back rewards at no extra cost.
The annual fee is zero.
Other Advantages and Disadvantages: In addition to the absence of fees often associated with other secured credit cards, Discover will assess your account after seven months to see whether you are eligible for an upgrade to an unsecured bill, a laudable objective for any secured credit card. Your security deposit does not earn interest, and the extra cash back at restaurants and petrol stations is set at $1,000 per quarter; nonetheless, getting rewards on a secured card is uncommon.
3. Petal® 1 Credit Card by Visa®
Qualifying as a new credit user for an unsecured credit card might take much work. The Petal® 1 “No Annual Fee” Visa® Credit Card, offered by WebBank, is one of a chosen few cards that may accept applicants with a limited or nonexistent credit history.
Reward: Receive 2%-10% cash back at select retailers.
Welcome Offer: There is no welcome bonus associated with this card.
The annual fee is zero.
Other Advantages and Disadvantages: Petal 1 does not demand a yearly fee or security deposit. It does not give a sign-up bonus or introductory APR, even though this is common for cards intended for those just beginning to establish credit.
A person with severely damaged credit is unlikely to be authorized for this card since Petal 1’s restrictions warn that prior bankruptcies or a history of missing payments may disqualify applicants. Consider a lower variable APR card if you intend to carry a debt.
How To Use a Credit Card to Rebuild Credit
Improving one’s credit score is the same as building a solid credit score. While there may not be a magic solution, there are steps you may take to make improvements.
Make all payments on time since this accounts for 35% of your credit score. Autopay might help you avoid missing payments if you struggle to track when invoices are due.
Maintaining a credit utilization ratio of 30% is essential for credit development. The balance of your current credit card debt to your available credit is one indicator of how much you are spending.
Lenders use the ratio as a measure of the borrower’s fiscal responsibility. If the ratio is under 10%, it is regarded as good, and under 30% is deemed better.
Limiting the times you apply for new credit is vital to avoid damaging your credit score. A rigorous credit check can decrease your score by anywhere from one to five points, and if it is successful, it may also reduce the average age of your accounts, which can lower your score. When raising your credit score, it’s best to only apply for a few new credit lines in one go.
In Conclusion
Credit cards are accessible even to those with bad credit records and may serve as a stepping stone to better financial status.
A variety of credit cards are available for those who do not have excellent credit, and not all of them are wonderful.
The best credit card for you will consider your current financial situation and long-term objectives. Watch for excessively high fees, interest rates, and credit limitations that will keep your usage ratio and credit score low.
Related Reading: How To Build Credit With Bad Credit