Getting a new credit card with a bad credit score is difficult, especially the regular ones that offer bonuses, perks, and a low-interest rate. However, with a set of intelligent decisions and some patience, you can get such a regular credit card.
This article will discuss what kind of credit cards you can get with a bad credit report. By using these cards, you can improve your credit report and qualify for a regular credit card.
Get a secured credit card
You can get a secured credit card even with bad credit because a security deposit from you backs your credit. When you close the credit card account, your deposit will be returned.
Until that happens, you should use your secured credit card for your transactions, and you must pay the full amount on or before the due date.
A consistent history of timely credit card payments will enhance your credit score. Someday, it will be enough to upgrade your secured card into a regular card.
Get a store card
Like a secured card, you can also get store cards from reputed stores, especially grocery stores. The credit limit may be small, but it can help you improve your credit score if you consistently pay the bills before the due date.
High fee credit cards
Some credit card companies offer credit cards to individuals with low credit scores. They don’t seek a security deposit but charge a high maintenance fee. They may also charge a high-interest rate than a regular credit card.
Like with other cards with bad credit, you can use the high fee credit card to improve your credit score and qualify for the regular credit card with low interest and low maintenance fee.
A credit card from your bank
Even with bad credit, you may have a regular checking bank account. Typically, the banks offer their account holders a complimentary credit card. You can use this card to use credit and build a good credit history.
This is a good option if you are a new account holder. But even if you have been a long-term account holder, your bank may give you a credit card because they understand your finances and risks better.
Show proof of cash flow
Suppose you are applying for a credit card, and you know your credit score is low. In that case, you can overcome this hiccup by showing the proof of money that you have or the cash flow that you are regularly receiving. Your bad credit reflects that giving credit to you is risky.
Your payment history is to blame for this kind of conclusion by credit card companies. But you may still have money in the form of investments – from fixed deposits to mutual funds and stock investments. You can show proof of these investments to make the credit card company believe that you have enough money to cover the limit that the company may offer.
You can also show proof of your income from your job or rentals from a property, or any other income you may have. Looking at your income and investments, a credit card company may find it less risky to offer you a credit card.
Check your credit score regularly
If your credit score is bad because of a few points, it can change quickly into a good credit score. If that is the case with you, you should regularly check your credit score as it is updated every week. You can find your credit report at TransUnion, Experian, and Equifax. You can also check it at AnnualCreditReport.com.
While you can get one credit score free of cost from all the three credit bureaus mentioned above, an additional report may no cost more than $12.5. However, you can check out your credit report and credit score at some of the sites or private financial companies.
These companies have tie-ups with credit bureaus. They offer credit reports and scores to the visitors to their sites and recommend what kind of credit they can get with their current credit status.
How to improve your credit score?
Your credit score must be good to get a new credit card with ease. Here are some steps on how you can improve your credit score.
Keep your credit utilization under 30%
When you approach a credit card company for a new credit card, they like to see your credit utilization ratio. If you utilize more than 30% of the credit limit, the credit card company thinks you are credit hungry. It associates this kind of behavior with risky credit. If you want your credit report to be good, keep your credit card utilization below 30% of the limit.
Don’t apply for several cards in a short time
When you file several applications for a new credit card, it sends the signal that you are in severe need of credit. This reflects negatively in your credit report. So, to protect your credit score from falling, you should not apply for credit cards to too many companies.
Close your credit card carefully
When you close a credit card, your credit card history is analyzed by the credit bureaus. Typically, your credit score gains when you have a longer and good credit history.
By choosing to close your credit card, you may end up sending the wrong signal to the lenders. They will find that your average age of credit is short. This impacts your credit score negatively. When you close your credit card, your overall credit limit gets reduced, but your credit remains the same.
This may shoot up your credit card utilization ratio beyond 30%, which again will impact your credit score.
Getting a new card with bad credit is possible, but you should choose this option only to improve your credit score and upgrade your card. If you think bad credit is terrible for you, you should take heart to the fact that there are millions of people with bad credit.
There are several options, from secured credit cards to credit cards offered against your investments. But while using these cards, you should aim at improving your credit score. That way, you can qualify for a regular credit card that offers several benefits, including a low-interest rate and low maintenance charges.
But the key is to remain a financially responsible customer who pays the bills on or before the due date.