Bad credit history makes it hard to get a new credit card. Compare your options and learn how to improve your credit rating here.
It’s difficult to get approved for a credit card in the U.S. when you have poor credit history. In fact, a bad or low credit score affects more than just your ability to get a new credit card. It can also make it harder to obtain other loans, a residential lease, utility account or even a new job.
While a bad credit score can have a negative impact on your chances of getting a credit card in the short-term, it’s possible to improve your credit rating over time. In turn, this improves your ability to get a credit card. But if you need to obtain credit urgently, this guide will help you understand your credit score and the different options available to you now.
What is my credit score?
Your credit score is derived based on factors in your credit history, and will determine your success when it comes to applying for credit. Currently there is no one standardized way of calculating credit scores, so the credit rating bodies, banks and credit card companies use their own rating systems in assessing client credit scores.
What financial products can I get with bad credit?
As bad credit rating credit cards aren’t available in the U.S., you might need to consider some of the following option:
- Debit cards. A good way to avoid debt is to steer away from credit and only spend what you have. Debit cards are debt-proof and widely accepted as payment. But note that using a debit card will have zero effect on your credit report and cannot help you rebuild your credit rating.
- Secured credit cards. This is a great way to rebuild your credit history, and you can learn all about how in our secured credit cards guide. Secured credit cards operate just like regular credit cards but require that you put down a security deposit to determine the limit of your card. Say you make a $500 security deposit, then you have a $500 card limit. This tells the issuer you have enough money to pay off the card. Provided the issuer reports to the three major bureaus — and most secured cards do — and provided you pay off your card on time, you’ll be on your way to lifting your credit score from bad to good in no time.
- Prepaid credit cards. Prepaid cards are similar to debit cards in the sense that you’re spending only what you have. Unlike a debit or credit card though, you load funds on the card before using it. These cards also don’t affect your credit rating and don’t charge interest, so they can be a good way to build up your budgeting skills. Most prepaid cards are either Visa or Mastercard, so you should be able to use them in the same places you’d use your credit or debit card.
- Bad credit payday loans. A cash or payday loan is a loan of up to $2,000 that has to be repaid between 16 and 365 days after it’s issued. Bad credit payday loans can be a quick answer to your short-term money woes and some lenders even skip the credit check as long as you’re employed. Repaying this loan on time can help with rebuilding your creditworthiness but there may be high interest rates and fees for choosing this option.
- Bad credit personal loans. Personal loans are traditionally used when borrowing larger amounts of money and typically have a stricter approval process than payday loans. But there are some bad credit personal loans on the market that cater especially for people with poor credit ratings. These loans usually come with a flat interest rate and, if you repay responsibly, can be used to rebuild your creditworthiness.
Credit card alternatives for borrowers with a bad credit rating
Ultimately, a bad credit rating can significantly impact your lifestyle, making it difficult to getting a car, a home loan, or other forms of credit. If you find yourself in such a position, don’t despair. Making the right choices from now on can lead to financial freedom down the road.
Work on improving your credit rating and managing your finances so that you can live free of debt. You may begin by requesting a free copy of your credit report and identifying the negative listings on your file. See our DIY credit repair guide next for more help.Back to top