How to Get a Credit Card If You Have a Low Credit Score

If your credit score is low, and you’re wondering how to get a credit card with bad credit — take heart. Plenty of credit card issuers realize there are people out there who may have hit a financial snag and want to rebuild their credit score.

In this article we’ll examine credit options, how to choose the best solution, and how to achieve it.

Can I get a credit card if I have a 500 score?

The short answer is “yes,” but the credit card’s terms may not be what you expect. The first step toward understanding why this might happen is knowing what credit scores are and how they are calculated.

Credit scores are created with programs called “credit scoring models.” The model most commonly used by credit bureaus is from a company called FICO®, and the three major credit bureaus (Experian, Equifax, TransUnion) use it to calculate the scores they assign people. FICO® scores range from 300-579 (poor credit), 580-669 (fair credit), 670-739 (good credit), 740-799 (very good), and 800-850 (exceptional.)

Fortunately, for those folks with credit scores on the low side or with no credit history at all, there are credit card issuers with options available to help rebuild credit. Although these cards might carry high interest rates, extra fees, and a low initial credit limit , they do provide the opportunity to begin rebuilding credit – and that’s important.

What is a secured credit card?

When most people think of a credit card, they are probably thinking of an unsecured card. With this type of card, the lender doesn’t require collateral to “back the card.” Unsecured credit cards are issued when lenders feel the risk is reasonable, and the borrower will likely pay everything back. Those with a credit score over 670 could most likely qualify for an unsecured credit card with good terms, low or no annual fee, and useful rewards.

Secured credit cards are a different type of card. Unlike unsecured cards, the lender requires collateral to issue secured cards. That collateral is almost always in the form of a refundable security deposit held by the lender. (In a way, it’s sort of a savings account for the card holder, as some lenders pay some interest on the deposit while it’s held.) This deposit removes most of the lender’s risk — if payments are missed on a secured credit card, the lender can use the security deposit to pay any balance due.

Usually, the credit limit on a secured card reflects how much you have on deposit. For example, deposit $500 and you get a $500 credit limit. If you want a higher credit limit, you deposit more money. After 6 months or a year of making on-time payments, some lenders may give you a credit-limit increase with no further deposits required. (Note, there may be a security deposit required for a card, so always read the fine print!)

One alternative for students with no credit score at all are “student credit cards.” Some advertise “no credit history required” and don’t charge annual fees. Others require proof of a part-time or full-time job to be approved, but otherwise there’s no credit score required. Some offer a higher credit line than you could get any other way – at least without making a large deposit. They’re a great option for building credit and more versatile than a prepaid or debit card. And there’s no need to draw down your bank account for a security deposit.

Store credit cards may also be somewhat forgiving to those with low credit scores. A big chain store wants your business, and that motivates it to approve someone with a low (or no) credit score, giving them a credit line, and even better, an unsecured line. As you make your purchases on a store card, your credit account info will be sent to the major credit bureaus. The resulting history will show up on your credit report and may boost (or establish) your score.

What do I look for in a new credit card?

There are quite a few cards that cater to people with low scores or a “thin” credit record. You might not find a card that offers everything you want, but you should consider certain factors when you are searching.

• Does the card issuer do a credit check? Many do, some don’t. If a credit check is required, is it a soft or hard inquiry? Hard inquiries impact your credit score, so be sure that you know what will happen when you apply.
• How fast is the approval time? And how quickly must you have the money?
• Do they offer competitive interest rates? Higher rates are to be expected when you have a low credit score. But some lenders push rates further than others. Make sure that if there’s a low introductory APR, the rate doesn’t skyrocket afterward.
• What kind of fees are there? It’s common for secured cards to charge annual fees. But some charge monthly fees as well, or additional “maintenance fees.” If you travel internationally, see if they charge foreign transaction fees. That can add up, too.
• Does the lender report your timely payments to all three credit bureaus? Some secured cards, and prepaid or debit cards, don’t report credit at all. That doesn’t help your credit score.
• What initial deposit is required? $200 is common, but if they require more, make sure you have the funds on hand to cover it.
• How high is the credit limit? Make sure it’s enough to suit your needs. Otherwise, keep shopping.
• Is the lender offering free credit education resources? Courses about different credit aspects let you grow your credit knowledge, and help you build solid finances.
• Does the lender offer an automatic credit line increase after a certain time and good payment record? With some cards, your credit limit is restricted to the exact amount on deposit, a dollar-for-dollar match.
• Are there rewards offered? Some cards provide a free credit score anytime you want, some award points to earn cash or get a statement credit, and some have an unlimited cashback match program. (If your card does offer rewards, make sure you don’t get caught up chasing them and piling on unnecessary debt.)

How do I get a credit card when I have a low credit score?

This process is pretty much the same as getting any other credit card — with one or two minor differences. Here’s a breakdown.

Check your credit report

There might be errors, wrong addresses, or even cross-information from someone with your same name. Free credit reports can be had by going to Annual Credit Report. Get yours and dispute any errors with the responsible credit bureau. Bring your accounts current on payments. If you’re delinquent on anything, it’s likely you’ll only be able to get a card that doesn’t run a credit check — which means higher fees and higher rates.

Shop around!

Don’t jump on the first card that looks all right. Plenty of lenders want your business, no matter what your score is. Check the details, fees, and perks. See if the limit fits your needs.

Apply

Once you settle on the best option, fill out the application. Doing it online is probably the easiest as well as the fastest. The days of mail-in applications, wait times, uncertainty of delivery — it’s all rapidly fading into the past.

Deposit

Most secured cards require the security deposit to be made in advance, so do that. Make a direct transfer online, if you can, it’s faster than mailing a check.

Wait

Now for the toughest, hardest part: Wait for approval. Don’t sweat it, though. With many cards, the answer comes within minutes or seconds. If not that, probably a day or two.

The last word

With a bit of research, and the knowledge you’ve gained from this article, you can do it! Go out there and get a credit card, no matter what your score is. Even if you have no score at all. It’s within your grasp!

This article is for educational purposes only and is not intended to provide financial, tax or legal advice. You should consult a professional for specific advice. Best Egg is not responsible for the information contained in third-party sites cited or hyperlinked in this article. Best Egg is not responsible for, and does not provide or endorse third party products, services or other third-party content.