Getting approved for a credit card can be challenging when you have a low credit score. Many lenders are hesitant to approve applications from individuals with less-than-stellar credit histories.
However, some options are still available for those seeking a credit card despite their low credit score.
This article will explore the best credit card options for individuals with low credit scores.
What is a Low Credit Score?
Before diving into the best credit card options for those with low credit scores, it’s essential to understand what qualifies as a low credit score. Credit scores typically range from 300 to 850; anything below 580 is considered a low credit score.
A low credit score indicates a higher risk of defaulting on debt, making lenders wary of issuing new credit lines.
Secured Credit Cards
Secured credit cards are an excellent option for those with low credit scores. These types of credit cards require a security deposit that is equal to your credit limit. This deposit acts as collateral, reducing the lender’s risk and increasing the chances of approval for individuals with low credit scores.
Secured credit cards usually have higher interest rates than traditional credit cards, but they offer the opportunity to rebuild your credit score.
With responsible use, on-time payments, and reduced overall debt, you can improve your credit score and eventually qualify for a traditional credit card.
Store Credit Cards
Store credit cards are another option for those with low credit scores. These credit cards are often easier to get approved for than traditional ones, making them an excellent choice for individuals with limited credit history or poor credit scores.
Store credit cards typically come with lower credit limits and higher interest rates than traditional ones, making them less desirable long-term. However, they can be helpful in building credit if used responsibly.
Be careful not to overspend and make on-time payments to avoid hurting your credit score further.
Credit-builder loans are another option for those with low credit scores. These loans work similarly to secured credit cards, with the lender holding the loan amount in a savings account while you make monthly payments. Once you’ve made all the payments, you receive the full loan amount.
Credit-builder loans are an excellent way to improve your credit score because they report to the credit bureaus, helping to demonstrate responsible credit usage.
However, be aware that these loans can come with high-interest rates and fees, so be sure to read the fine print before signing up.
Prepaid Debit Cards
Prepaid debit cards are not technically credit cards but can be an excellent option for those with low credit scores. These cards load a set amount of money onto the card, which you then use for purchases.
Because there is no credit involved, no credit check is required, making them an easy option for those with poor credit.
Prepaid debit cards do not report to the credit bureaus, so they won’t help you improve your credit score. However, they can be helpful for day-to-day purchases, and some even offer rewards programs.
Best Credit Cards for Low Credit Scores
Some options are available if you’re looking for a traditional credit card despite your low credit score.
However, be aware that these credit cards often come with higher interest rates and lower credit limits than traditional credit cards.
One option is the Capital One Secured Mastercard. This card requires a security deposit but allows you to increase your credit limit over time with responsible use. It also reports to the credit bureaus, helping to improve your credit score.
Another option is the Discover It Secured Card. This card also requires a security deposit, but it offers cashback rewards on purchases and the opportunity to upgrade to an unsecured credit card after eight months of responsible use.
There are several credit card options available for those with low credit scores. Secured credit cards, store credit cards, credit-builder loans, and prepaid debit cards are all viable options for those looking to rebuild their credit.
Traditional credit cards with higher interest rates and lower credit limits can also be a good option if used responsibly.
When choosing a credit card, be sure to read the terms and conditions carefully and make on-time payments to avoid further damaging your credit score.