8 Tips On How To Apply For A Credit Card With Bad Credit

The truth is that you may have a harder time getting approved for a credit card if you have a bad credit score — or a score under 580, according to FICO.

About 20 percent of people with bad credit who applied for cards through our site were approved, according to data from Bankrate. Meanwhile, 32.6 percent of applicants with good credit were approved and only 7.1 percent with no credit history were approved.

Without access to credit that you can use responsibly, it can be difficult to build or rebuild credit. But while you may not qualify for the best credit cards on the market yet, there are ways to improve your chances of getting approved for a credit card event with bad credit.

Check out these eight tips that might improve your odds.

1. Give Experian Boost a try

Information about rent, utilities and subscription payments are rarely reported to the credit bureaus, but Experian Boost adds that alternative data to your credit report, which can help increase your score with minimal effort.

However, Experian Boost can quickly raise your credit score only if it reports positive data. To make sure Experian Boost has nothing negative to add to your credit report, you’ll have to continue to pay your bills on time and in full every month.

2. Consider opening a secured credit card

With a low credit score, you may have a better chance at getting a secured card than an unsecured one. This type of credit card requires a cash deposit as collateral, often making it easier to open a new line of credit. The best secured cards report your responsible credit use to the three main credit bureaus, which can help increase your credit score over time.

Many secured cards even offer rewards for spending and charge no annual fee. For example, the Discover it® Secured Credit Card offers:

• 2 percent cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter (then 1 percent)
• 1 percent cash back on all other purchases

You’ll need to put down at least a $200 security deposit, but it’s refundable. Plus, at seven months, your account will be automatically reviewed to see if you can upgrade to an unsecured card.

3. Research credit cards for bad credit

In addition to secured cards, there are a few unsecured options for those with poor credit. However, be warned that even the best credit cards for bad credit tend to be light on benefits and heavy on fees and interest charges. They can still give you a chance to prove your creditworthiness, though, when others won’t. Look for cards that fit your financial needs and lifestyle and will provide you with the best route to building up your credit.

4. Apply for a store credit card

Store cards — or retail credit cards — can be another option if you have poor or limited credit. These cards can be relatively easy to qualify for, although you’ll typically start out with a low credit limit.

It’s worth noting that many store credit cards are “closed-loop cards,” meaning they can only be used in one brand of store. If you apply for a store card from Kohl’s, for example, you can only use it for purchases at Kohl’s. But there are some store cards that are “open-loop” and can be used anywhere. These cards will have Visa or Mastercard (or another mainstream payment processor) printed on them.

No matter what type of store card you apply for — make sure that it reports your activity to the credit bureaus. This can help you build credit if you use the card responsibly. Just keep an eye out for things like high interest rates and deferred interest promotions, which can be both misleading and costly to consumers.

5. Prequalify without hurting your credit

If you’re unsure whether you’ll be approved for a card, you can get prequalified without a hard inquiry on your credit report. Many card issuers let you check for preapproval or prequalification for certain cards.

You can also start with Bankrate’s CardMatch™ tool, which shows you which cards you’re likely to be approved for with no impact to your credit.

6. Become an authorized user

Consider asking a trusted family member or friend if you can become an authorized user on their credit card account. It doesn’t require an application or credit inquiry, and you’ll have access to a credit card to use and build credit with.

The credit card’s usage — including from the primary cardholder and other authorized users — will likely be reflected in your credit history. This means that if the primary cardholder uses their card irresponsibly, it can positively affect your score, and vice versa. The primary cardholder is solely responsible for payments, but it’s important for the authorized user to also use the card responsibly to keep your relationship and your credit intact.

7. Look for an interest rate close to the average

Annual percentage rate (APR) for credit cards describes the yearly interest that’s charged to borrowers when they carry a balance on their card. Your credit card APR will be determined by your creditworthiness, which indicates to the card issuer the amount of risk it is taking by extending your credit. The lower your credit score, often the higher the APR you’re charged.

Some credit cards for poor credit charge APRs that are truly dizzying at around 30 percent. The closer you can get to the average APR — currently around 20 percent — the better.

In most cases, because of the way credit card interest works, you can avoid interest entirely if you pay your bill in full and on time each month. Most credit cards come with a grace period, yet it’s worth reading the fine print of any card to confirm that yours does too. If there’s a chance you might carry a balance, prioritize getting the lowest interest rate card option you’re eligible for.

8. Aim for the highest credit limit

Securing a high credit limit can be tough if you have bad credit, but you’ll want to shoot for as high as you can (as long as you won’t be tempted to overspend).

Here’s why: Your credit limit affects your credit utilization ratio, which is a significant factor in your credit score. Credit utilization is the amount you owe divided by the sum of your credit card limit. So, if you have a $200 credit limit and a $100 balance on the card, your credit utilization is 50 percent.

It’s recommended that you keep your credit utilization below 30 percent. But a good rule of thumb is the lower the percentage, the better your credit score. So, if you believe you’ll have a better chance at obtaining a larger credit limit with a secured card, thanks to your security deposit, then it may well be worth taking that route.

The bottom line

Credit card options can feel limited when you have a low credit score, but they’re out there. Finding ways to build credit and boost your score is a great place to start. When you do get approved for a credit card, remember that the one you get doesn’t have to be your only card forever.

With on-time payments and other credit-building habits, you can graduate to a card with better rewards and benefits in time.