Are you thinking of getting a credit card but still worried about your bad credit?
Well, credit scores below 579 are considered low by many lenders, and it’s an indication that you are a high-risk borrower.
For card issuers to approve your request, they’ll consider your credit history and other factors about your credit and payment patterns. Getting approved, therefore, may become an uphill task if you are living in bad credit.
It is, however, not impossible to get a credit card with bad credit or no credit at all.
You only need to change your spending habits, pay bills on time and maintain a low credit balance so that you can improve your credit to qualify you for better deals.
In this guide, we’ll enlighten you more on what are unsecured credit cards for bad credit, how to qualify, what to do if your request is declined, how to rebuild your credit, and some of the best picks for you.
What are unsecured credit cards for bad credit?
Unsecured credit cards are simply credit cards that don’t require you to put up some deposit as collateral for your request to be approved or for your credit limit to be increased in case you are accepted. They are the most popular credit cards in the market today.
With these cards, you don’t have to worry about making a deposit to be approved. Since the card issuer has no cash deposit to fall back to in case you default on payments, they may take legal action against you and ask the court for permission to garnish your wages, report your delinquent accounts to the major credit bureaus, or forward your details to a debt collecting agency.
If you are already living in bad credit, these actions may hurt your credit further.
Secured credit cards, on the other hand, will require some cash deposit before you are approved.
This deposit is put up as security so that if you default on payment, the card issuer will take up the cash as compensation.
Despite the many legal risks unsecured credit cards posses, many people still prefer them over secured credit cards. With these cards, you don’t have to pay any money to be approved, you’ll get lower interest rates, and you are also eligible for some reward programs.
Some drawbacks of unsecured credit cards for bad credit
Although many people prefer unsecured credit cards to secured ones, these credit cards have some disadvantages for people living with bad credit.
Some of their shortfalls are:
- They come at very high APR rates.
- You have to pay an annual fee.
- There are usually monthly charges to be paid.
- There is a processing fee.
How to qualify for unsecured credit cards for bad credit
If you have been living in bad credit or have no credit at all, your chances of qualifying for an unsecured credit card are zero.
Most credit card issuers will look at your credit history, and reject your request because to them, you are a high-risk borrower and the probability of you defaulting on payment is quite high.
Your best options, in this case, is to apply for a secured credit card, use it responsibly for at least six months, and during this period, make sure you don’t overspend, pay your debts on time and keep your credit balance very low. This way, you’ll improve your credit and be eligible for unsecured credit cards.
Another option would be to get a friend who’ll take an unsecured credit card jointly with you to keep you from paying the deposit and work your way on getting your credit card.
After improving your credit scores, you can apply for unsecured credit cards. You may have to wait for 12 to 18 months to be approved, and your request is accepted, the card issuer will refund the deposit.
What to do if you request for unsecured credit card is rejected
Usually, if your application for a credit card is rejected, it’ll show on your credit reports as a hard pull, and this will even deteriorate your credit further. The best thing to do is not to apply for another credit card immediately.
Wait for some months and apply for a credit card that offers guaranteed approval or one that does a soft pull on your credit. That way, you’ll not damage your credit.
You can also call the credit company’s reconsideration line usually printed at the back of the rejection letter. Talk to their representative and ask them the reasons for their rejection and what options you have.
If they agree to work with you as you improve your credit, you can apply for a secured credit card and work on rebuilding your credit to qualify for better credit card deals and access higher credit limits.
How to build your credit faster
As mentioned earlier, getting credit cards for bad credit is a daunting task. Your only option would be to work on improving your credit to make it easier for approval.
Below are some strategies you can use to rebuild your credit:
- Get your annual credit reports from the three reporting bureaus.
- Analyze them and if you find any errors or negative information that’s false, you have a right to raise disputes with the credit bureaus.
- The credit bureaus will look into your inquiry and the facts you presented as proof, and if your allegations are right, they’ll get back to you in 30 days with the amendments and a new credit rating.
- Once you repair your credit, you can improve it further by keeping a low credit utilization rate.
- Pay your credit card balances on time every month.
- If you have a running loan, make monthly payments on time to avoid creditors treating it as a delinquent account.
- Change your spending habits and only take loans you can comfortably pay back.
Have some saving aside that will wade you through emergencies to keep you from borrowing.
- Pay your bills on time every time.
Some of the top 4 unsecured credit cards for bad credit you can choose from
- Store credit cards
You probably have heard of card offers in stores that entice you to sign up for a credit card with a promise that you’ll receive a discount or a cash back reward on your current purchase.
The probability of being approved for these cards compared to other regular cards is quite high, and it may seem like a good way of building credit, but they do have their pitfalls too.
- High approval rates – your chances of being approved are very high. Unlike regular credit cards, there are usually no uncertainties of rejections.
- A great way of saving money – the store offers rewards on every purchase you make and send you member discounts. If you are a frequent shopper in the issuing store, you can save some bucks with this card.
- You can use your credit card on that particular store; therefore, your shopping options will be limited.
- They tend to charge high-interest rates.
- Capital one quicksilverone cash reward credit card
If you are looking to earn some cash back rewards while building your credit, this unsecured credit card is your best bet.For an annual fee of $39, you’ll receive a 1.5% cash back reward for every purchase you make every day and an APR of 24.99%, but this usually varies.Advantages
- If you make the first five monthly payments on time, you’ll be eligible for a higher credit line.
- You’ll receive a 1.5% cash reward for every purchase you make every day. This is a good deal for people living in bad credit or those with no credit.
- If you have a high balance, you may incur a lot of expenses on interest because these cards come with a steep APR. Always try to pay your credit balances on time to avoid incurring more expenses.
- The annual fee of $39 makes it less ideal for many individuals living with bad credit.
- Capital one platinum credit card
It offers no rewards but charges a $0 annual fee.
The APR charged is 24.99% on regular purchases, but this also varies.
This unsecured credit card is ideal for individuals living with fair, average or no credit at all.Pros
- Prompt payment for five months earns you a higher credit line.
- The no cash rewards program limits you and reduces the temptation of overspending on reward purchases. It is, therefore, an ideal way of building your credit and reducing your credit utilization rate.
- Like other credit cards for people with bad credit, the APR is quite high. The only alternative is to clear the balances on time to avoid penalties.
- Total visa credit card
Total visa charges an APR of 29.99 which is the highest in the market.
Unlike other credit cards, if you apply for this unsecured credit card, you’ll pay $75 for the first year then pay $48 annually.
It’s ideal for people with poor credit but comes with a lot of charges which include:
- A processing fee of $89
- A monthly service fee of $6.25
- Late payment fee of up to $38
- Card fee of $29 annually
- And a cash advance fee
Apply for this credit card cautiously because it’s way more expensive than your regular cards.
One of the best ways to qualify for better credit card deals is to have a good credit score.
If you have been living in bad credit or have no credit at all, you can start by improving your credit scores to give you more options when applying for a credit card.
Unsecured credit cards for bad credit come at high APRs, but if you choose to go for them, apply cautiously and go for those that are cheaper and will give you more ways of building your credit rather than deteriorating it further.
Always read the advertisers disclosure before making a decision.