What Makes the Best Credit Cards with Low Credit
Does your FICO score make you want to tear your hair out? Tired of being denied when applying for credit cards? Worried that you won’t ever get out of a vicious debt cycle?
You’re not alone. While the average American credit score ranks around 700 (an all-time high!), many people struggle with the burden of low credit.
Are you struggling to find credit cards with low credit? We’ve got the best solutions and the ultimate guide to restoring your credit- and your sanity.
Let’s get into it!
What’s In A Credit Score, Anyway?
Credit scores range from 300 to 850. In a nutshell, the higher the number, the better. Here is the typical breakdown:
- 750+ Excellent credit
- 700-749 Good credit
- 650-699 Fair credit
- 600-649 Poor credit
Your credit score can have a tremendous impact on your daily living. It can determine interest rates for mortgages and car loans. Just a couple points can make a difference between spending tens of thousands on interest!
As a result, you want your credit score to be in tip-top shape.
While obtaining credit may be challenging when you have less-than-optimal scores, there are numerous ways to get credit cards with low credit or even no credit at all.
More on that to follow.
What Goes Into A Credit Score?
Five major categories make up a FICO score. Again, the higher the score, the better. While mortgages and credit cards with low credit are available, you will enjoy lower rates with a higher credit score.
1. Your Payment History (35% of score)- Are you always on time with your payments, or do you sometimes run late? If it’s the latter, then this could wreak havoc on your score. Your payment history refers to any delinquencies and public records on your score.
2. Amounts Owed (30%)- Carrying a large balance? Owe too much in debt? This balance can be impacting your score. This figure refers to the amount of available credit you’re using on revolving accounts.
3. Length of Credit History (15%)- You’re more likely to be approved for credit cards with low credit if you have a lengthy credit history. This figure refers to the average length of account activity you’ve had across all cards.
4. Types of Credit Used (10%)- This refers to the mix of accounts you have (including credit cards with low credit, mortgage, student loans, etc.)
5. New Credit (10%)- This refers to applying for new credit. When applying for credit cards with low credit, the credit bureaus will check your credit. This is known as a credit inquiry, and it can impact your score.
In general, credit scores, similar to the temperature, can ebb and flow. The number fluctuates depending on many factors. Don’t be surprised if you check your score one day and notice that it increases or decreases a few points the next week.
How Can You Check Your Credit Score?
Applying for credit cards with low credit? First, you need to know if you actually have low credit! Fortunately, there are several ways to check your credit score.
Credit score services: Today, many services and websites offer free credit scores. You can check your score by signing up for a credit monitoring service.
Companies often offer both free and premium trials. Be sure to check the reputability of these sites before entering your information.
Buy your score: You can also check your score directly from credit reporting companies, such as myfico.com.
Low credit counselors: If you have low credit, you may be able to receive financial help. In fact, several credit counselors and housing counselors can help provide you with credit reports.
Current credit card websites: Already have credit cards with low credit? You may want to check their sites. Today, several major banks and credit card companies, such as Discover, Capital One, and Chase offer free FICO scores.
Benefits of Secured Credit Cards
Secured credit cards are great options for people applying for credit cards with low credit or no credit.
They work just like a standard credit card, but they do offer something different.
You need to put down a refundable cash deposit as a form of collateral payment. The amount you deposit is equivalent to your account credit line. Unsecured cards, on the other hand, do not require this cash deposit.
For example, with a secured card, if you put down $1000, your credit line is $1000.
This security helps the lender feel more comfortable offering you credit lines without a credit checking. That’s because they already can clear the balance if needed.
Interest rates can vary based on your current credit score, so it’s important to do your research and compare your options.
For many people, secured credit cards provide the easiest way to improve your credit score. They also can help you prevent overspending and racking up more debt.
Benefits of Unsecured Credit Cards
Aiming to apply for credit cards with low credit? You might be intrigued by the virtues of secured credit cards, but what if you don’t have the cash deposit available?
Maybe you already have a secured credit card, but you’re still looking for ways to improve your score.
Naturally, you won’t have all credit options available to you. That means you can’t just happily apply for any credit card. You will likely get denied if you do that.
As a rule of thumb, you will also likely be responsible for higher interest rates. Keep that in mind if you struggle with overspending.
However, everyone falls on bad luck, and you might be on the right path to improve your score with the following products:
Credit One Bank Unsecured Platinum Visa
The gist: It’s unsecured, designed for people with bad credit, and even offers 1% back on all everyday purchases. This 1% bonus comes back in the form of an automatic statement credit to help you pay off your remaining credit.
It’s an excellent card for starting to rebuild your credit (and even earn a tiny bit of extra cash).
Just be sure that you don’t charge anything you can’t pay for outright. Keep a budget and pay off your bill in full each time.
Total VISA Unsecured Credit Card
This is one of the best credit cards with low credit because it allows you to dip your feet back in slowly.
This card caps your initial credit limit at $300, which can help significantly reduce the chance of overspending. With just 35% of Americans paying off their credit card in full each month, this is a great way to keep you disciplined and motivated not to overspend and overcharge.
This card does come with upfront fees (currently $89 for processing and $75 for annual- dropping down to $48 after the second year). Costs, however, are standard for credit cards with low credit.
This credit card is a great way to take a proactive and disciplined approach- without the risks of running up high spending.
Indigo Platinum Mastercard
Issued by Genesis Bankcard Services, this card is excellent for people who have previously filed bankruptcy. It’s also helpful for those with fair to poor credit. This card advertises that it helps consumers with limited or damaged credit make a fresh start.
Other good news? It reports to all three major credit bureaus, which gives you the chance to establish a positive credit history.
Card benefits include MasterRental Insurance, extended warranties, travel assistance, fraud protection, and roadside assistance. Upon applying, your credit limit will be reviewed, determined, and approved.
First Access Visa Card
This no-frills option is one of the best credit cards for low credit. It reports to all three credit bureaus, and it has an easy and secure online application.
If you are approved, you will pay your processing fee and be able to access your $300 credit limit. No initial deposit is required.
Your credit limit can increase based on your credit score.
Rebuilding Less-Than-Perfect Credit
While applying for credit cards with low credit is essential for rebuilding credit, there are several other necessary steps to take into consideration.
Pay Your Bills
First things first, commit to paying your bills on time moving forward. This includes all bills, such as your rent payments and utility charges. Remember, your payment history is vital for establishing credit.
Set up automatic withdrawals to avoid missing payments. Make a budget and stick to it!
With practice, you will start maximizing every penny out of your paychecks. Remember, you are giving your future self an invaluable gift.
Tackle Your Debt
Your credit utilization focuses on revolving debt. If you are using most of your available credit, it can count against you and your credit score.
Not to mention, with the average credit card interest hovering around a staggering 18.76%, carrying this debt is quite the burden. You may feel stuck in a never-ending cycle of feeling broke.
Take it one step at a time. Focus on paying down the balances with the largest interest rates first. Budget, budget, budget. Take on a side gig if you must.
Make your debt an emergency, and treat its plan of attack accordingly.
Implement Strong and Healthy Financial Habits
Your credit score can take 2-4 months to change. With that said, it can take up to 3 years to fully recover. Your takeaway? Be patient with the process.
In the meantime, focus on solidifying your financial habits.
Live within your means. Focus on your needs, rather than your wants. Learn how to make your money work for you.
As soon as you can, set yourself up with an emergency fund. Most financial experts recommend about 3-6 months of saved expenses. This nest egg will help you if an emergency does (and inevitably will) occur.
As a result, you will be less likely to revert to the old habit of charging things you can’t afford on your credit cards with low credit.
Consider an Installment Loan
In addition to credit cards for low credit, installment loans can also help improve your financial health.
These loans have equally portioned payments over a designated timeframe. They end when fully paid.
Banks typically issue the following loans:
Secured loans: These loans tend to have lower interest rates because the lender can repossess the item back (think cars or houses).
Unsecured loans: These loans aren’t actually backed up by anything the lender can reclaim (think loans for personal causes, business, or student loans). They also tend to have higher interest rates for this reason.
If you’ve lost your home or had your car repossessed, you already know the damaging financial consequences. You also probably know how it can devastate your credit.
Adding another loan to your financial picture might be the last thing on your mind, but for some, it’s a great idea.
That’s because it can actually improve your types of credit used, which enhances your credit diversity. This may bump up your credit score. Furthermore, the loan can also help reduce your credit utilization rate.
These two factors play significant roles in determining your credit score.
A Look at Credit-Builder Loans
Fortunately, many banks and lenders now offer credit-building loans for people with poor credit scores.
Here is how it works: when you get approved for a credit-builder loan, the bank deposits money into a savings account or certificate. When you pay off the loan, you receive access to your money.
As a result, you increase your credit history- and you also build yourself up a substantial emergency fund.
Just be sure to make all your payments on time and in full. Just like with other loans, avoiding your payments can hurt your credit score.
Final Thoughts on Credit Cards with Low Credit
Building your credit score can feel like a hassle. It can also feel incredibly overwhelming. This is most true for anyone who has struggled with financial hardship or poor credit scores.
Fortunately, many banks now offer credit cards with low credit to help improve your financial health. Consider checking out your options today.
At Eastwood Bank, we provide informational and educational material for all things related to your financial situation.