Many people run into credit problems because of hardship such as medical problems or a lost job. You may also end up with bad credit because of a divorce, getting in over your head in debt or simply forgetting to make a payment. Do you think that having bad credit means you can’t get a credit card? Here’s what you need to know about credit cards and bad credit.
What is Considered Bad Credit?
The credit score that’s considered bad credit can vary from one lender to another. Using the FICO score model, a score below 579 is categorized as poor. Scores between 580 and 669 are considered fair. However, some lenders may consider scores under 620 or 630 to be bad credit.
The higher your credit score, the better deals you’re likely to be approved for, such as zero percent interest for a year or longer or other attractive rewards. If you’ve had some credit missteps, you probably won’t be approved for the most enticing deals, but that doesn’t mean you won’t be approved at all.
Secured Credit Cards
A good place to start if you’re trying to rebuild your credit, or if you have no credit history, is by getting a secured credit card. Your credit line will be secured by money you keep in a savings account, so the creditor is assured they’ll be paid back. As you build or rebuild a history of making payments on time, your credit score will gradually improve, and it will be more likely you can get approved for an unsecured card.
Getting a Cosigner
If you’re having difficulty getting a credit card on your own, getting a cosigner can help. A friend or family member that’s willing to cosign with you can make it easier for you to be approved for a credit card. The cosigner will be equally responsible for the outstanding debt.
Credit Cards for Bad Credit
Some credit cards are aimed at people who have bad credit. While you might be easily approved for one of these, keep in mind the interest rate may be very high, and you may also be charged an annual fee. If you’re trying to rebuild your credit, it may be worth it to you to have one of these cards on a short-term basis. If you do, keep your balance low and pay it back as soon as you can.
Knowing Where You Stand
Before you try to apply for a new credit card, be sure you know where you stand. Find out your credit score and what information is being reported by the credit bureaus. You may find that there are errors on your credit report that may make it even more difficult to be approved for a credit card. Things to look for include accounts that have been paid in full showing as open or accounts that you’ve paid on time showing with a late payment on the payment history.
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