If you can’t get approved for a credit card, don’t give up. You may have other options.
If you’ve applied for credit cards, only to be denied again and again, poor credit is likely what’s keeping you from getting approved. Maybe you missed payments in the past when you lost your job or other circumstances caused a negative payment history. Whatever the reason, the good news is that credit can be repaired over time.
One way to improve your credit is to build a positive payment history. However, if you can’t get a credit card to start rebuilding your credit, that can be difficult. Fortunately, there are a few ways you may still be able to get approved for a credit card even with bad credit.
What is bad credit?
Your credit may not be as bad as you think. On the other hand, poor credit could be the main reason your credit card applications keep being denied. So, you need to find out where you stand on the poor-to-excellent credit score range.
Here’s the rundown of credit score categories, according to Fair Isaac Corporation (FICO). Many lenders use your FICO score to determine your creditworthiness.
- Poor: Lower than 580
- Fair: 580 to 669
- Good: 670 to 739
- Very good: 740 to 799
- Exceptional: 800+
If you fall in the poor FICO score range, you don’t stand much of a chance at getting approved for a traditional credit card, at least for now. But that doesn’t mean you must resign yourself to a cash-only existence.
There’s more than one way to get a credit card so you can gradually boost your credit score.
One of these methods below could be just what you need to put a credit card in your wallet.
Find out: Are There Credit Cards For Those With Bad Credit?
Apply for a secured credit card
You’re not the only one out there paying for past credit transgressions. Plenty of people struggle to obtain credit due to a low credit score. That’s why some banks and credit card companies offer consumers with poor credit what’s known as a secured credit card.
With a secured credit card, you pay the credit card issuer an amount of money that serves as a type of deposit on the card. Then the issuer typically sets the card’s credit limit at that amount. This eliminates risk for the credit card company. If you default on what you owe on the card, the credit card company can use that deposit to pay the balance.
Getting a secured credit card can help you build a positive credit history — as long as you use the card responsibly and make payments on time. Start with charging less than $20 a month and then paying off the card statement balance every month. This will help you build a positive payment history, which accounts for around 35% of your credit score.
Accounts with negative payment history automatically drop off your credit report after seven years. So, a new positive payment history helps improve your credit score so you can eventually get a better credit card with a better interest rate, rewards program and higher credit limit.
Find out: 6 Things to Know About Secured Credit Cards
Apply for a retail credit card
Store credit cards usually have more relaxed credit requirements than major credit cards. Even if you can’t get approved for a major credit card, you might qualify for a retail credit card. Just like with a secured credit card, be responsible with how much you charge. Then pay off the balance each month.
This helps you build a positive payment history so you can get approved for a better credit card later. Retail credit cards generally have much higher interest rates than non-store credit cards, so paying off the statement balance also means you won’t pay interest.
Find out: Which Credit Card Type is Right For You?
Become an authorized user
Becoming an authorized user on someone else’s credit card can help improve your credit. When you’re an authorized user on another person’s card, that person is responsible for paying the card. However, that doesn’t mean you don’t need to pay off your balance each month. Make all payments on time just like you would if you were the primary cardholder.
Before becoming an authorized user, check whether the credit card issuer reports to major credit bureaus so the account will merge with your own credit on your credit report. Also make sure the primary cardholder is responsible, has good credit and makes all payments on time. Otherwise, being an authorized user could affect your credit negatively.
Find out: 7 Things to Know About Becoming a Credit Card Authorized User
How long does it take to build good credit?
When you have poor credit, it can take two or three years to improve your credit score to the good or excellent range. But that time will pass whether you’re building a good credit history or not, so be patient. Once you have a positive payment history, credit card issuers are much more likely to approve you for credit cards with better terms.
Find out: 7 Ways Fixing Bad Credit Can Change Your Life
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Published by Debt.com, LLC