Best Credit Cards for Bad Credit of December 2022

If you've had trouble getting a credit card, then one of these credit cards for bad credit could be the solution. Whether the problem is past mistakes that hurt your credit or having zero credit history to your name, it's all a matter of finding the right card. Whether you're looking to improve or start building your credit, here you'll find our picks for the best credit cards for bad credit.

Bad credit is one of those problems that can affect your life in all kinds of frustrating and costly ways. Landlords can use your credit to decide if they'll rent to you. Employers can use it for hiring decisions. In most states, your credit can even determine how much you pay for car insurance. As you can see, a bad credit score means a lot more than just paying higher interest rates on loans.

On a positive note, anyone can improve their credit. But to do that, you'll need to understand what causes bad credit in the first place and what it takes to build a better credit score.

Bad credit scores range from 300 to 579 using the FICO system and 300 to 600 using the VantageScore system. FICO is the most widely used scoring system, and VantageScore is the second most popular. If you're new to credit scores, it's good to understand that there's more than one scoring system -- and that your credit score is a number that ranges from 300 to 850.

When you have a bad credit score, you won't have many credit card or loan options. You'll likely only qualify for credit cards and loans that are aimed at applicants who have bad credit.

After bad credit, there's fair credit, which is a FICO® Score between 580 and 669 and a VantageScore between 601 and 660. You can get approved for more financial products once you have fair credit, although you'll still have a more limited selection than consumers with good or excellent credit.

Knowing your credit score is essential if you want to monitor your financial health and take steps to improve your credit. Plus, it can help guide you in choosing the right credit card to apply for as you begin to consider card options. The good news is it's simple to check your credit score.

One way to do so is to use a free credit monitoring and credit score service. You'll need to sign up for one of these services and log in to view your score. Examples include Experian CreditWorks℠ Basic and Discover® Credit Scorecard. These services are free to use and provide you with a FICO® Score. As a note, Discover doesn't require you to be a cardholder to use their service.

Knowing your score can give you a better understanding of where your finances stand and help you make more informed decisions so you can improve your credit score.

Certain factors can cause bad credit. Here are some examples:

Bankruptcy

If you've filed for bankruptcy or plan to do so, this can be one of the most significant factors that result in bad credit. Depending on the type of bankruptcy you've filed for, this negative mark will stay on your credit for seven to 10 years. It's important to consider this before filing for bankruptcy.

Missing payments and late payments

Payment history makes up 35% of your credit score. If you're missing payments or making late payments, this can cause bad credit. If you've made payment mistakes in the past, you can make changes from now on. If you want to improve your credit, be sure to pay your bills in full and on time.

High credit utilization

Your credit utilization ratio is how much of your available credit you're using. If you have a high credit utilization (using more than 30% of your total available credit), this can negatively impact your score. It's best to use less of your available credit if you want a higher credit score. Using less available credit also shows that you have a smaller percentage of outstanding debt.

Having no credit or minimal credit

If you have little to no credit history, that can be a factor that leads to bad credit. Your best bet is to begin building credit now because the length of your credit history will increase over time, which looks good to creditors.

The biggest consequence of bad credit is that if you need to apply for anything that requires a credit check, you're much more likely to get declined. Examples include:

• Credit cards
• Personal loans
• Auto loans
• Mortgages
• Home rental applications

Even if you get approved, the terms will be worse than they would be for a borrower with good or excellent credit. You may get a credit card, but it won't have much in the way of rewards or benefits. A landlord could rent to you, provided you pay a much larger security deposit.

When it comes to loans, it's best to show you an example. Here's how much a 60-month auto loan for $25,000 would cost, using national APR averages, depending on your credit:

Excellent credit would save you $155 per month, and $9,256 in total interest over the life of the loan.

Those are the most obvious effects of bad credit, but they're far from the only ones. Here are some additional challenges you could deal with:

• Many utilities providers charge security deposits to new customers with subpar credit.
• Most states allow car insurance companies to charge higher premiums to drivers with lower credit scores.
• Employers can run a credit check before deciding whether to offer you a job.

Can you erase a bad credit history?

You can't completely erase a bad credit history -- at least not overnight. But, you do have a couple of options when it comes to removing specific concerns:

If something is inaccurate on your credit report and it's having a negative impact on your credit, you can dispute it. You can do this by contacting each of the three credit bureaus to file an official dispute. The Federal Trade Commision has a sample letter that you can use. Your best bet is to send your letter by mail, so that you can track it and have a record of it being sent.

If you have a late payment mark on your credit report and you've been a loyal customer, it's worth reaching out to your creditor to request a goodwill adjustment. They may agree to remove that late payment mark, which can improve your credit history. You can make a request by phone, but sending a letter is an even better idea. A letter gives you a chance to explain in detail why your payment was late.

You can also negotiate with your creditor if you're looking to have a poor mark removed and they're not willing to remove it right away. For example, if you still have outstanding debt with the creditor, you may ask if they will remove the poor mark if you pay the balance in full right away.

These are a few ways to erase parts of your bad credit history. If none of these options work for you, you'll need to continue to work on improving your credit history by making smart financial choices.

The most important thing to look for in a credit card for bad credit is its fees, but you should also check its APR, its minimum and maximum security deposits, and what kind of credit limit you can expect. Here's an explanation of each item.

Fees

Most credit cards have fees, but what you don't want are unavoidable fees. Fees for cash advances or balance transfers shouldn't scare you off from a specific credit card -- you can easily avoid both by not making those types of transactions.

Fees that should make you think twice are annual fees, monthly maintenance fees, and any other regular fees the card issuer charges no matter what. These are expenses you don't need, especially from a card that probably doesn't have many benefits.

APR

Ideally, you'll pay your full statement balance and never incur interest charges. But it's also nice to have a credit card that won't gouge you in interest if you ever need to carry a balance. You can calculate your interest payments by using this calculator.

Minimum/maximum security deposit

With secured credit cards, you should check what the minimum and maximum security deposit amounts are. The one that's more important for you depends on how much you have saved for a security deposit.

If you don't have much saved, you'll need to ensure you can pay a card's minimum deposit amount. If you have solid savings and you'd like to pay more up front for a higher credit limit, then you'll need a card that allows a high maximum deposit.

Credit limit

If possible, you should research the credit limits a card offers. This information is usually available with secured credit cards, but you can sometimes get it for an unsecured card as well.

You don't need a ton of available credit. But if your credit limit is too low, it can be difficult to maintain a low credit utilization ratio, and that can affect your credit score.

Rewards

Not all credit cards for bad credit offer rewards, but some do. As you consider your options, you may want to prioritize cards that offer rewards because they can provide value to you.

You can expect to earn anywhere from 1% to 3% cash back for most credit cards for bad credit with rewards potential. It's worth noting that cards that offer higher rewards rates may have a cap on how much you can earn. You may be able to earn unlimited rewards at a lower earning rate. Remember, some cards for bad credit offer no rewards at all.

If you want to get a credit card with bad credit, your best bet is to see if you can get prequalified for a card. That way, you can make sure you will be eligible for a card without hurting your credit score with a credit check, only to find that you don't qualify.

While it depends on the card issuer, most of the major credit card companies have prequalification pages on their websites that let you check offers you'll likely be approved for.

To find out if you prequalify, you'll just need to enter some basic personal information. Most card issuers ask for at least some of the following:

• Full name
• Address
• Date of birth
• Last four digits of your Social Security number

Once you've submitted the required information, you'll see any cards that you have a good chance of qualifying for with that card issuer. Remember that this doesn't guarantee your application will be approved.

If you're not able to get prequalified for a credit card for bad credit, it's a good idea to take some time to work on improving your credit. Ready to get started? Here's how to apply for a credit card and get approved.

How to improve your credit

You can improve your credit score with time and effort. Remember that there is no instant fix. You can't build credit quickly, but you can build it up over time. In order to do this, you need to understand the elements that make up your credit score. Working on each of these can allow you to improve your credit and increase your credit score.

Here are the five factors used to calculate your FICO® Score and how you can get high marks in each one:

• Payment history (35%): On-time payments are the key to excellent credit. While you can't undo previous late payments on your credit file, you can avoid late payments in the future. That's the number one habit you need to raise your credit score.
• Credit utilization (30%): Your credit utilization is the sum of your credit balances divided by your combined credit limit. For example, if you have one credit card with a balance of $200 and a limit of $500, then your credit utilization is 40%. The lower you can keep this number, the better. A good goal is to always have your credit utilization below 30%. If yours is higher, then you should focus on paying off debt.
• Length of credit history (15%): Creditors will obviously consider a borrower who has had a credit card for 20 years to be less risky than one who has only been using credit for three months. The best way to improve in this area is to open a no-annual-fee card and keep it open forever.
• Credit mix (10%): It gives you a slight credit score advantage if you have both revolving credit, such as credit cards, and an installment loan on your credit file, instead of just one of the two. But since this has only a small impact on your credit score, you shouldn't take out a loan solely to boost your credit. You can attain an excellent credit score even if you only use credit cards.
• New credit inquiries (10%): When a company looks at your credit report to make a credit decision, this inquiry is reported on your credit report for two years. Credit inquiries only affect your FICO® Score for one year, though. Don't avoid opening a new account just because of the small impact to your credit score, but don't open a bunch of accounts in quick succession, either.

Having a bank account is not a requirement when applying for a credit card. However, application requirements can vary by credit card company, so you may need a bank account to get approved for certain cards.

Even though a bank account isn't required to get a credit card, it does make your credit card payments more convenient. Just about every credit card company lets you pay online if you have a bank account. You can make an online payment that counts toward your bill that same day, so you don't need to worry about making a payment days in advance. Another option is to set up autopay.

If you don't have a bank account, you'll need to find an alternate payment method. There are other options available. For example, you could pay by mail using a money order, or you could pay in cash if your credit card company has a branch in your area. But there's nothing as convenient as paying online. To simplify your payments and better protect your savings, it makes sense to open a bank account.

The easiest credit card to get when you have bad credit is a card that is marketed towards people with bad credit. These cards have less strict requirements in place for applicants. You'll be more likely to get approved for a credit card for bad credit if you have a lower credit score, poor credit history, or limited credit.

Some bad credit cards have easier approval odds than others. Here is one option:

OpenSky® Secured Visa® Credit Card: While this is a secured credit card and will require you to make a deposit before using it, this card has a low annual fee and is a good choice for people who are rebuilding their credit or who have very limited credit. There is no credit check requirement when going through the application process -- making it a good option for many.

If you've unsuccessfully tried to get other secured cards with no annual fee or any other credit card for bad credit, this one may be an easier and better option for you to consider.

If a credit card for bad credit isn't for you, there are some other options to explore.

Secured loan: A secured loan is a type of loan you can get when you put something of value, such as a car or home, up for collateral. If you're having trouble qualifying for a personal loan, a secured loan could be a good option to help you rebuild credit. However, it's important to remember that the lender can sell your collateral to pay back the loan if you miss payments. For more options and information, check out the best personal loans for bad credit.

Subprime credit card: In fact, you may receive offers in the mail inviting you to apply for these. Subprime credit cards typically have fees that end up costing you a lot of money. Take, for example, the First Access VISA® Credit Card. There's a $95 program fee to open the card. You pay a $75 annual fee the first year. That drops to $48 annually going forward, but in year two, you also pay a $6.25 monthly servicing fee, totaling $75 annually.

To avoid all these extra fees and to know what you're getting into before you apply for a card, check the fee disclosure of any card you're considering. If there are fees just to keep the card open, it's probably not worth the cost.

Want to learn more? See The Ascent's First Access VISA® Credit Card review.

Another option: Try to get a secured card. If that doesn't work out, check out The Ascent's Total Visa card review.