Conventional wisdom may lead you to believe that if you have bad credit, you should swear off credit cards. But if you want to improve your credit score you’ll have to show you can handle credit responsibly—and the only way to do that is (you guessed it) to have a credit card. Used properly, it
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Conventional wisdom may lead you to believe that if you have bad credit, you should swear off credit cards. But if you want to improve your credit score you’ll have to show you can handle credit responsibly—and the only way to do that is (you guessed it) to have a credit card. Used properly, it can actually be a helpful tool to assist in rebuilding bad credit—and, luckily, there is a whole host of products catered to people with poor credit scores. While these often come with higher interest rates and lower spending limits, they can be a good starting point to re-establishing a good credit score, which in turn will help you get approved for loans, a line of credit, or even a mortgage down the line.
When selecting a credit card to rebuild your credit score, you’ll need to choose between a secured and unsecured product. A secured credit card is one that’s offered on the condition that you “secure” it with collateral, usually in the form of a refundable deposit that can be claimed by the lender if you default on your payments. These cards are marketed directly to those with bad credit (so they have an easier approval process, and come with no frills), but they work—lenders report back your activity to the credit bureau which builds up your score as you continue to repay responsibly.
While not generally available to those with bad credit, unsecured cards are occasionally offered to consumers with “fair” credit scores (generally in the 600 to 650 range). As the name suggests, an unsecured card doesn’t require a deposit, and so it might seem like an obvious choice. Plus, unlike secured cards, many unsecured credit cards offer rewards (think travel points or cash back). That said, they can command tougher approval requirements than unsecured cards. It’s always a good idea to read the fine print when selecting your product.
Capital One Low Rate Gold Mastercard
The Capital One Low Rate Gold Mastercard is a solid choice for people with a low credit score. For a $79 per year fee, cardholders get a competitive 14.9% interest rate and access to a few perks including price protection, travel benefits, and insurance.
If you don’t qualify for the unsecured Capital One Low Rate Gold, Capital One will still approve you for their alternative secured product, the Capital One Guaranteed Secured Mastercard – which makes for a good fail-safe and helps people access a credit card with a security deposit from $75 and a $59 annual fee.
For those looking to establish a positive relationship with a credit card company and to repair their credit, Home Trust offers two great secured credit cards to choose from.
Home Trust Secured Visa (Low Interest)*
For an annual fee of $59, the Home Trust Secured Visa approves almost all applicants for a card with the lower-than-average interest rate of 14.9%.
The credit limit is set at the amount of the applicant’s deposit (between $500 and $10,000).
Click here for more details about the Home Trust Secured Visa Low Interest Card*
Home Trust Secured Visa (No Annual Fee)*
For applicants who prefer a no-annual fee option, there’s a version of the Home Trust Secured Visa that carries an interest rate of 19.99%.
Click here for more details about the Home Trust Secured Visa No Fee Card*
Although you must have an income of at least $12,000 per year and qualify for a minimum of a $500 credit limit, this card’s low interest rate of 16.99% on purchases, and no annual fee, are attractive for an unsecured card—and perfect for those with a low credit score. And, for accounts opened by October 31, 2019, there’s an introductory 3.99% interest rate on balance transfers for six months, so you can take the opportunity to pay down debt accumulating in higher-interest accounts.
Click here for more details about the No-Fee Scotiabank Value Visa*
The Refresh Secured Visa is in line with the other cards on this list in terms of its interest rate (17.99%) but it earns its place on the list for two distinct reasons. First, you’re guaranteed to be approved without a credit check, which means you can avoid further damage to your credit score. And, second, with its Financial Intelligence Training—a free, online educational program—it offers further tools for those with bad credit to improve their financial picture. (As an added bonus, you can earn $100 each time you refer someone you know to sign up for the card, which isn’t going to dig you out of debt on its own but is a nice incentive).
Click here for more details about the Refresh Secured Visa*
Once you’ve chosen a card, it’s time to rebuild your credit. Remember that as time passes and you use your credit responsibly, the credit bureau will automatically adjust your score. Here are some other rules to keep in mind:
If you’re struggling under the burden of a bad credit score, finding an appropriate credit card can be a strong first step. With consistent and responsible use, you can rebuild up your reputation and, over time, access the financial benefits you need.
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