If you’ve made mistakes with your credit before, or are just starting out with credit cards, it can take a 1–2 years before you’ll be approved for the high-reward cards.
The good news is that there’s some credit cards designed specifically for people starting to build-up their score.
- Pre-paid credit card
- Minimum deposit cards
- Low credit line cards (< $500 max)
In most cases if you have a credit score under 640, most of your options will carry severely high interest rates (if you don’t pay the full amount each month).
Here’s a breakdown of how your credit score is calculated:
- 35% = Payment history
- 30% = Amount owed
- 15% = Credit history length
- 10% = New lines of credit
- 10% = Type of loans (ex: mortgage vs. credit card debt)
How to Get a Credit Card With Bad Credit
If you’ve struggled with debt in the past and are looking to get back to a “good” credit score (700–850), here’s a few pointers.
#1. Look online for the best credit cards for bad credit
It’s hard to stay up-to-date on all the latest credit cards — there’s literally dozens of new options each quarter, and even the ones that exist may offer a different interest rate, penalties fees, or perks.
Being approved is fairly easy since it’ll either be a pre-paid card, or require some form of deposit in case you don’t pay the balance. This type of credit card also gives you free access to view your credit score, and lets you request a credit limit increase if you you’ve been making the monthly payments.
On a long enough timeline, good-faith credit activity will increase your credit score to the point where you can graduate to a better card.
#2. Look over your credit report for errors
Sometimes, having bad credit is not the fault of poor habits; sometimes, fraudulent activity can lower your credit score, especially when it goes unnoticed. Also, if you are repairing bad habits, it is important to make sure there aren’t erroneous or duplicate inquiries on your score.
There are many ways to get your credit report — you can make a request for a free credit report with the FTC, by going to FreeCreditReport.com and filling out a form. Credit reports can be viewed online or mailed to your home.
U.S. consumers are entitled to 1 free report every 12 months
Once you have it, look it over for inconsistencies, old delinquencies that should have lapsed, and other discrepancies between your activity and the report. By notifying credit agencies of these errors, you can bring your credit score up dramatically.
#3. Negotiate with your lenders
Often, you will be able to speak with credit card representatives to work out agreements to waive or reduce monthly minimum payments, or lower your interest rate, for the purposes of making paying down your debt manageable.
Some strategies for debt consolidation or management include making a lump-sum settlement (in which you pay a lower balance with a one-time payment), a hardship plan (a lower interest rate or minimum payment due to financial or medical expenses), or ask to get on a debt management program.