Having a low credit score can make it difficult to get approved for credit cards. However, there are a number of credit cards available that are designed specifically for those with credit scores under 500.
These cards can allow you to build your credit score and improve your financial standing. In this article, we will take a look at some of the best credit cards for those with under 500 credit scores.
What is a Credit Score?
Before we dive into the best credit cards for under 500 scores, let’s first review what a credit score is. Your credit score is a three-digit number that represents your creditworthiness.
This number is based on your credit history, which includes your payment history, credit utilization, length of credit history, and more.
Lenders use your credit score to determine your creditworthiness and the likelihood that you will repay your debts on time. Generally, the higher your credit score, the more likely you will be approved for credit cards and loans at favorable terms.
Best Credit Cards for Under 500 Scores
Capital One Secured Mastercard
The Capital One Secured Mastercard is an excellent option for those with under 500 credit scores. This card requires a security deposit, which is collateral for your credit limit. However, this deposit can be as low as $49, making it an excellent option for those just starting to build their credit.
The Capital One Secured Mastercard also offers free access to your credit score and the ability to monitor your credit reports. This can help you stay on top of your credit and work towards improving your score over time.
The APR for purchases with this card is variable but competitive compared to other secured cards on the market. This card also has no foreign transaction fees, making it a great choice for international travel or online shopping.
Capital One also offers fraud coverage and automatic account alerts to help protect against unauthorized charges. Capital One Secured Mastercard can be a valuable tool in improving one’s credit score while providing helpful features like no foreign transaction fees and fraud protection.
Discover it Secured
The Discover it Secured card is another great option for those with under 500 credit scores. This card requires a security deposit of as low as $200. However, the Discover it Secured card offers rewards, including 2% cash back on gas and restaurant purchases up to $1,000 per quarter and 1% cash back on all other purchases.
The Discover it Secured card also offers free access to your FICO credit score and allows you to monitor your credit reports. Additionally, Discover reviews your account after 8 months to see if you qualify for an upgrade to an unsecured card.
It’s important to note that, like with any secured credit card, a security deposit equivalent to your desired line of credit is required upfront with Discover it Secured Credit Card. However, if used correctly over time can be refunded back into their account as well as upgrading their account too.
Milestone Gold Mastercard
The Milestone Gold Mastercard is a credit card designed specifically for those with poor credit. This card doesn’t require a security deposit and offers a credit limit of up to $1,500.
The Milestone Gold Mastercard also reports to all three major credit bureaus and offers free access to your credit score and credit monitoring services. Additionally, the card offers a number of benefits, including fraud protection and online account management.
Citi Secured Mastercard
Citi Secured Mastercard is an excellent option for those with a credit score below 500 who want to rebuild their credit. With this card, you can purchase and build up your credit history without worrying about overspending.
One of the benefits of this card is that it reports to all three major credit bureaus, which means you can see improvements in your score if you use the card responsibly. Additionally, Citi offers fraud protection and zero liability for unauthorized charges on your account.
Another great feature of the Citi Secured Mastercard is that after making consistent payments on time for 18 months, you may be able to upgrade to an unsecured credit card. This will give you more flexibility and potentially higher limits.
It’s important to note that a $200 minimum deposit is required before getting approved for this secured card. However, if used correctly, the benefits far outweigh any initial costs or fees associated with using a secure credit card like this one from Citi.
Wells Fargo Secured Visa® Card
Wells Fargo Secured Visa® Card is a great option for rebuilding their credit history. With this card, you can set your own credit limit by making a deposit as low as $300 and up to $10,000.
One advantage of the Wells Fargo Secured Visa® Card is that it reports monthly to all three major credit bureaus, which allows you to improve your credit score over time with responsible use. Plus, this card has zero liability protection for any unauthorized purchases on your account.
Another perk of using this secured card is earning rewards points for every dollar spent on eligible purchases. You’ll receive 1 point per dollar spent and can redeem them for travel, gift cards or cash back.
Additionally, Wells Fargo’s “My Money Map” tool lets you track how much money you spend each month in different categories like groceries or entertainment. This feature helps you better understand where your money goes and how to manage it more effectively.
The Wells Fargo Secured Visa® Card allows individuals with bad or no credit history to establish reasonable payment habits while enjoying some benefits along the way.
OpenSky® Secured Visa® Credit Card
The OpenSky® Secured Visa® Credit Card is an excellent option for rebuilding their credit score. One of the benefits of this card is that it does not require a credit check, making it accessible to those with poor or no credit history.
Another advantage of the OpenSky® Secured Visa® Credit Card is its flexibility in terms of deposit amounts. Unlike some other secured cards, you can choose your own security deposit within a range based on your creditworthiness. This means you can start with as little as $200 and build up from there.
Additionally, the OpenSky® Secured Visa® Credit Card reports to all three major credit bureaus, meaning responsible use can help improve your credit score over time. And because it’s a Visa card, it’s widely accepted both domestically and internationally.
While the APR may be slightly higher than other secured cards on our list, the lack of an annual fee and additional perks like fraud protection make this card stand out as a solid choice for those working towards better financial health.
How to use a credit card responsibly
Using a credit card responsibly is crucial to maintain a good credit score. The first step towards responsible credit card usage is always to pay your bills on time. Late payments can result in fees and higher interest rates, quickly adding up and damaging your credit score.
It’s also important to use only your credit card for purchases you can afford to pay off in full each month. Avoid overspending or making purchases that are beyond your means, as this will lead to accumulating debt.
Another way to use your credit card responsibly is by monitoring its usage regularly. Keep track of all transactions and check them against monthly statements for any unauthorized charges or errors.
In addition, it’s important not to max out the available balance on your credit card as this may negatively impact both your utilization rate and overall credit score. Instead, try keeping the balance below 30% of the available limit.
Avoid applying for multiple cards at once, as this could hurt both short-term and long-term prospects with lenders. By using these tips wisely, you’ll be able to establish a healthy relationship with using a credit card while maintaining financial stability!
Conclusion
It’s important to understand that a low credit score doesn’t have to prevent you from obtaining a credit card. With responsible use, these cards can help you rebuild your credit and improve your financial situation.
When choosing a secured credit card, be sure to consider the fees and interest rates associated with each option. Look for cards that offer rewards or cash-back programs to maximize their benefits.
Remember to always make payments on time and keep your balance low to avoid further damaging your credit. By responsibly using one of these best credit cards for under 500 scores, you can take steps towards improving your financial future.