There are credit cards for folks just like you. If your credit score is in the range of 350-500, you don’t have a vast amount of options, but you do have some. The best strategy may be to get a secured card. Secured credit cards require a deposit when you set up the account. That money sets your credit limit. If you deposit $200-300, that’s how much your credit line is. If you don’t pay what you owe, the lender doesn’t lose out, they will take money from your deposit. If you are a model credit citizen and pay your bills promptly, over time you’ll raise your credit score and qualify for an unsecured card. When you upgrade or close a non-delinquent secured card, the issuer refunds your deposit.
Because you put up collateral, it’s easy to get a secured credit card. Keep in mind, the goal of getting a secured card is to build and boost your credit. Be sure to find out if the secured card you’re applying for is reports to the three major credit bureaus, Experian, Equifax and TransUnion. If your secured card doesn’t report to them, it won’t help your credit history and negates the point of having the card.
What’s key is to do the right thing when you get your new card. “To start with, make purchases between 50% to 90% of the credit limit then when your bill comes the next month either pay it off or at least to 30% of the credit limit. What that's doing is showing the credit card company and everybody that looks at your credit report that you are being responsible with the new credit that you have, this is the most important thing now on your credit report,” says Steven Millstein, a certified credit counselor and editor of CreditRepairExpert.org.
Here are some options for those with bad credit.
Best secured credit cards
Jacob Lunduski, financial and credit card industry analyst with CreditInsider.com likes the Discover It Secured Credit Card. “It is one of the only secured cards to offer rewards. It offers 2% cash back at restaurants and on gas and 1% on all other purchases. Discover also doubles the cash back you earn in your first year,” he says.
He also gives thumbs up to the Capital One Secured Mastercard. “It stands out from other secured cards since your credit limit isn't equal to the amount you provide for the security deposit. You'll be told a minimum required security deposit that you must provide based on your creditworthiness. That'll be either $49, $99, or $200,” he says.
Best unsecured credit cards
There are some unsecured credit options for people with bad or limited credit, because card issuers take several elements into account when deciding if you'll be approved or not for a card. Lunduski shares his favorites. The Journey Student Credit Card from Capital One is designed for people with fair or limited credit scores. “You don't need to be a student to apply for this card. It'll even score you 1% cash back for every purchase.”
His other choice is Capital One’s Platinum Credit Card. “This is the best unsecured credit card for building your credit. This card comes with benefits like price protection, extended warranties, and auto rental collision damage waivers.”