bad Credit

Best credit cards for bad credit: Rebuild credit

Best credit cards for bad credit: Rebuild credit
Written by Publishing Team

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If you have a low credit score, you may be surprised to learn that getting a new credit card can actually help you. If you are able to get a new card despite bad credit, you will have the opportunity to build better credit habits and creditworthiness through responsible use. Not only that, but adding a new card can improve your credit score and credit score if you’re already in debt.

Unfortunately, credit card options for people with bad credit tend to have few benefits. For example, you generally won’t get a welcome bonus with these types of cards, and they usually charge fees, such as annual fees and foreign transaction fees. Bad credit credit cards can also come with high interest rates, which makes carrying a balance an expensive endeavor.

But with all that said, it is important to understand that some credit cards for bad credit are much better than others. So let’s take a look at the types of credit cards you may be eligible for with poor credit, as well as how you can use them to your advantage.

Click here to see the latest list of the best credit cards for people with bad credit scores.

If you have bad credit, you probably already know about it. After all, a poor credit score usually means that you were denied access to a credit card or other loans in the past because the lender felt you were a significant financial risk. You’ll also likely know why you have poor credit to begin with, whether it’s because you’ve defaulted on a loan or credit card, have an account that goes to collections collections, or have bankruptcy on your record.

But even if that were the case, it wouldn’t hurt to check your credit score so you know exactly where you are. Fortunately, there are several ways to check your credit score for free.

You can start by signing up for a credit monitoring service that provides a free credit score, or for a program that offers free credit tracking tools. For example, Experian Boost gives consumers a free look at their FICO credit score, and can also help you improve your score quickly.

As you work on your credit score, you will probably want to pay the most attention to your FICO credit score, since it is the most widely used scoring form. FICO credit scores range from 300 to 850 and are broken down into the following levels:

  • Excellent: 800 and above
  • Very good: 740 to 799
  • Good: 670 to 739
  • Fair: From 580 to 669
  • Weak: 579 and below

While a really “poor” credit is a FICO score of 580 or less, a “fair” credit between 580 and 669 is still below average when compared to other US consumers. If your credit score falls into any of these categories, you should take steps to improve it as quickly as possible.

Check if you qualify for one of these credit cards for people with fair credit.

If you have poor credit, there are two different types of credit cards you can qualify for – secured credit cards and unsecured credit cards.

Secured credit cards are usually the easiest to get if you have bad credit. However, secured credit cards require a cash deposit to get started. This means that you may be required to provide $200, $500 or more in collateral, and you will usually receive a low credit limit equal to or close to your deposit.

The biggest benefit of secured credit cards is that they are usually reported to the major credit bureaus. This means that all of your payments on time are added to your credit report, which can help boost your credit over time. And although you have to make a cash deposit to open a secured card, if you later close the account or upgrade in good standing and your balance is $0, your deposit will be refunded.

Save money with these best credit card deals for people with poor credit scores.

In addition to secured credit cards, you may also be able to qualify for an unsecured credit card with bad credit. These cards tend to come with low fees, credit limits, and few benefits, but they can help you build credit in the same way.

Store credit cards are also a type of unsecured credit card that can be easier to approve for people with bad credit, as they can generally only be used at the store or chain that issues the card.

Aside from the ease of getting approved, the biggest advantage of store credit cards is that if you find yourself frequently shopping at a particular retailer, you may be able to save some money, whether it’s on your initial purchase or down the road. future shopping trip. Using a store credit card usually saves you 5% of your purchases, and store credit cards can also come with other benefits you might not have thought of.

Before you get a new credit card, you should make sure that you have a clear understanding of what you hope to achieve. While getting a credit card gives you a chance to improve your credit, you can make your credit worse if you’re not ready to take responsibility. So before applying, ask yourself these questions:

  • Do I plan to balance? If you want a credit card so that you have the option to carry credit, you should know that credit cards for bad credit come with high interest rates. Not only that, but secured credit cards require you to deposit cash as collateral, so they are not a good option if you need a loan.
  • Am I interested in rewards? Some credit cards offer people with bad credit the opportunity to earn rewards for your spending. While bonuses can be lucrative, keep in mind that they often tempt people to spend more than they planned.
  • Do I want to pay an annual fee? Not all credit cards for people with bad credit charge an annual fee, but some do. If you decide to pay an annual fee, you need to make sure that any benefits you get in return are worth it.
  • Am I ready to take my credit seriously? A new credit card gives you a chance to improve your credit, but it won’t happen automatically. For the most part, getting a new credit card will only help your situation if you keep your balance low and always pay your bill on time.

The best credit cards for poor credit may not sound very attractive, but the point is to use them to boost your credit score so you can qualify for better deals later. But there are a few “problems” to watch out for, including:

  • Outlay: While you should strive to avoid annual fees if you can, you should also be aware that some credit cards, especially those for people with bad credit, try to charge account opening or program fees. Avoid these offers as much as possible.
  • High APRs: Watch out for high interest rates that can make taking on debt very expensive. In fact, if you plan to use a credit card to improve your credit, you should try to avoid carrying credit on the new card entirely.
  • credit errors: Finally, watch out for mistakes that hurt your credit in the first place. The worst thing you can do is pay your credit card bill late, as this will have a huge negative impact on your credit score, so avoid this at all costs.

Compare credit card offers available to people with fair credit.

If your goal is to get a new credit card to help rebuild your credit, you need to know and understand how to determine your credit score in the first place. Let’s take a closer look at the five factors that make up your FICO credit score:

  • Payment date: 35%
  • Amounts Owned: 30%
  • Credit history length: 15%
  • New Credit: 10%
  • Credit mix: 10%

When you look at these factors, it’s easy to see what your next steps should be. Most importantly, you should strive to pay your credit card bill – and all your other bills – on time each month. Also, you should keep your debt to a minimum because the amount you owe in relation to your credit limits makes up 30% of your FICO score, also known as your “credit utilization ratio.”

Since any credit card you get with bad credit will likely have a low credit limit to begin with, you’ll need to be especially careful not to increase your credit limit, and to pay off your balance as much as possible each month to keep your credit utilization low.

The length of your credit history can also be increased if you keep old credit accounts open and in good standing, and you can keep your score high in the “new credit” category by refraining from opening too many new accounts.

Your credit mix is ​​one last category to consider, but you may not have many different types of credit — such as installment loans like a mortgage or car loan — when your credit score is fair or poor. Once you improve your credit score, you can worry more about diversifying your credit with installment loans, revolving accounts, and other types of credit.

Ultimately, if you’re going to get a new credit card in an effort to improve your bad credit, you need to make sure that you don’t make the same mistakes that caused the problem in the first place. So if you decide to apply for a new credit card, be smart about how you use it. Don’t overspend, don’t pay your bills late and avoid cards that charge high fees so you can get back on the road to getting good credit.

Learn more about the best credit cards you can get with a bad credit score.

Is your credit score good or excellent? Or maybe you don’t have any credit at all? CNN Undercover Have you covered with our other stories in this series:

Check out CNN Underscored’s list of Best Credit Cards of 2022.

Get the latest personal finance deals, news, and tips at CNN Underscored Money.

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