Best Credit Cards for Bad Credit

Although some people may think bad credit is only important when you want to get a loan, having a poor credit history can also impact things like obtaining a new utility account or renting an apartment. But bad credit doesn't have to be a "forever" problem.

Obtaining a credit card can help you improve your credit score when you use the card responsibly — which includes making on-time payments and keeping your balance low. But let’s start by explaining how these cards work and what you should expect as a cardholder.

1. What is a Bad Credit Score?

A so-called “bad” credit score is a score that’s so low most lenders won’t extend new credit due to the risk involved. But for all intents and purposes, a bad credit score is technically defined as anything below 580, according to FICO, the credit-scoring model used most by lenders to determine creditworthiness.

FICO Score Categories	Score Range
Exceptional	800-850
Very Good	740-799
Good	670-739
Fair	580-669
Poor	Below 580

 

The next most used credit-scoring model is VantageScore, and both scores are based on the information in your credit reports. Most people have three credit reports, which are compiled by each major credit bureau: Equifax, Experian, and TransUnion. Your reports contain information about how much credit you have and how responsibly (or not) you’ve used that credit.

In essence, your credit score is simply a numerical representation of the information in the credit reports on which it is based.

Scores exist so lenders, including card issuers, can get a quick snapshot of your credit without having to read your reports line by line. Scores enable lenders to automate the approval process for loans and cards, since computers can understand numbers much easier than they can read written reports.

The term “bad credit” generally describes a credit report that shows a pattern or history of high-risk credit behaviors, such as:

• Paying bills late
• Missing payments
• Maxing out credit cards
• Defaulting on loans
• Having accounts sent to collections
• Vehicle repossession, mortgage foreclosure, or bankruptcy

A credit report with these types of activities produces a low credit score.

The FICO score is what lenders use most often. The company that invented this score, Fair Isaac, Corp., says 90% of top lenders use it to help them make billions of credit-related decisions each year.

A lower score signals worse credit habits, and a higher score shows better credit habits. The average credit score in America is well over 700.

A higher score doesn’t necessarily mean you’ll be a lender or credit card company’s best customer. It only means you’re more likely to be a good credit risk (i.e., you’ll repay your debts and make your payments on time).

Whether your score is good or bad depends in part on the lender’s objectives. Some lenders prefer high-quality, i.e., excellent credit customers whose very high scores make them less risky from the lender’s point of view.

Other lenders cater to people who have fair or poor credit scores. Most major banks offer credit cards and other financial products to people in a range of credit categories.

As Fair Isaac explains, “Each lender has its own strategy, including the level of risk it finds acceptable for a given credit product. There is no single ‘cutoff score’ used by all lenders.”

2. What Causes Bad Credit?

The primary cause of bad credit is not paying your bills on time — or at all. Creditors want to know you’ll repay your debts, so a history of late or missed payments is an instant sign of bad financial habits.

Your credit score reflects this as well, since your payment history is 35% of your FICO credit score.

Even a single delinquent payment after years of responsible credit use can damage your scores, and a recent history or pattern of late or missed payments will drop your score by dozens of points. Serious credit problems, like a recent repossession, foreclosure, or bankruptcy, can also depress your scores.

Credit scoring algorithms are highly complex. Consequently, there are also other, more nuanced reasons why your score might drop.

For instance, you may be using more of the credit you have available or you may have applied for multiple new credit lines or loans within a short period of time.

Both of these activities can hurt your scores because they suggest that you may be experiencing financial difficulties and could have problems paying future bills on time.

Your recent credit behavior affects your scores more than your older behavior. That means that if your credit is impaired, you can improve it by adopting better credit habits and building a better, more recent track record of using credit responsibly.

Over time, your credit mistakes will drop off your report and stop dragging down your scores. For most negative accounts, it takes seven years for an item to fall off your credit reports, though some bankruptcies can take longer.

3. How Does a Subprime Credit Card Work?

This type of card works just like any other credit card, but it is accessible to consumers who have lower credit scores. It’s important to note that poor credit is the result of past financial mistakes, and the credit card offers you’ll qualify for are a reflection of that.

This means you’ll be charged higher interest rates than someone who has good or excellent credit. In fact, the typical APR for someone who has bad credit can reach nearly 23% or higher.

Here is the latest data from the CFPB’s Consumer Credit Card Market report:

Credit score range	Average Credit Card APR
Superprime (800+)	9.30%
Prime plus (720 to 799)	14.50%
Prime (660 to 719)	18.10%
Near prime (620 to 659)	20.50%
Subprime (580 to 619)	21.60%
Deep subprime (579 and under)	22.80%

No one will know that your card is designated for someone whose credit rating is less-than-stellar. And there are all kinds of credit cards in this category — you can get a business credit card, a student credit card, a store credit card, and even a cash rewards credit card with a low credit score.

These types of cards aren’t meant to be in your wallet forever, though. They’re designed to help cardholders improve their scores with timely payments and responsible spending, after which you can graduate to a card with more favorable terms, which leads us nicely to our next question…

4. How Can a Credit Card Help Rebuild Your Credit?

The best way to improve your credit is to use financial products responsibly to build a positive history that will be reflected in your credit scores. Since credit cards are a form of credit, using them responsibly can help boost your scores.

Here are four tips for building credit with a credit card:

• Make all of your card payments on time
• Don’t max out any of your cards
• If you’re using more than 30% of the total credit you have available, try to lower your card balances
• Don’t close card accounts unless a card has an annual fee you’re no longer willing to pay or a card is secured by a deposit, and you’ve improved your credit enough to qualify for an unsecured card

One simple way to build credit using a card is to use it for a single recurring charge, such as the monthly charge for a streaming service. Don’t use the card for any other purchases.

Then, set up automatic credit card payments through your bank account so that the card is paid in full shortly after the recurring charge hits your account. This way, you won’t miss any payments and will build a positive payment history over time.

5. What is Credit Utilization & How Does it Impact Your Credit Scores?

Your credit utilization ratio compares how much credit you’re using with how much credit you have available. Imagine you have three credit cards with limits, as shown in the table below.

If you charge $500 on Card A, your credit utilization ratio for that card would be $500 / $2,000 = .25, or 25%.

	Card A	Card B	Card C	Overall
Balance	$500	$0	$2,150	$2,650
Credit Limit	$2,000	$3,000	$5,000	$10,000
Utilization Ratio	25%	0%	43%	26.50%

However, scoring models also factor in your overall credit utilization, which would be the ratio of your total credit limits to your total credit card debt. So when you add in balances on Card B and Card C, and their credit limits, that number may fluctuate.

A lower overall ratio means you’ve used less of the credit you have available. That’s a good credit habit that can help your scores.

A higher overall ratio means you’ve used more of the credit you have available. That’s a poor credit habit that can hurt your scores.

If you’ve been turned down for a loan or card due to high credit usage, your credit utilization ratio may be the problem. To fix it, pay off some of your revolving debt to improve your overall percentage.

6. How Long Does It Take To Rebuild Your Credit Scores?

You can rebuild your credit score if you’re willing to adopt better habits. But the process isn’t a quick fix and can take several months or longer to see improvement.

The best advice for rebuilding your credit is to responsibly manage it over time and watch your score rise little by little. Here are seven ways to start rebuilding credit:

• Catch up on any recent missed or late payments
• Set up monthly payment reminders to help you pay your bills on time
• Lower your credit utilization ratio by paying off debt
• Don’t close card accounts for no reason
• Don’t apply for new cards that you don’t need
• Don’t obsess about any one factor that influences your scores
• Be patient

You don’t need an 800-plus score to get beneficial credit offers. Even a modest improvement in your low or middling scores could pay off in better interest rates and higher credit limits.

7. Do All Credit Cards Report to the Major Credit Bureaus?

Not all card companies report all their customers’ payments to each major credit bureau every month. Instead, reporting practices vary from one card company to the next.

Most major banks report your credit history, but some small banks or credit unions may not. Among those that do, the frequency and timing of their reporting may also vary.

One way to find out which of your issuers report your activity is to get copies of your reports and read them yourself. They’re not difficult to understand.

In fact, you can get copies of your credit reports for free as often as once per week by visiting AnnualCreditReport.com. Keep in mind that card companies can change their practices, so a card that’s currently reported might not be reported in the future and vice versa.

Another option is to call your card issuers and ask if your payments are reported, to which of the three bureaus, and how often. Some companies post this information on their website as well.

If a card appears to be missing from one or more of your credit reports, there are four possible reasons:

• The company doesn’t report to one or more of the bureaus
• It could be a mistake
• It could be a technical glitch
• The card company changed its name or is going through a merger with another company

Since credit reporting is voluntary, the bureaus cannot force your card company to report your payments. You can ask, but your request isn’t likely to change your card company’s policy. You can’t self-report your payments.

Any card that’s not shown on your credit report won’t help you improve your credit scores.

8. What is a Secured Credit Card?

A secured credit card is one that requires a cash deposit to secure any charges that you make with the card. If you miss a payment, the card company can deduct it from your deposit.

The deposit might be equal to your credit limit, or it might be a lower amount. Some cards allow a higher limit with a deposit of a few hundred dollars.

Some secured cards can be converted into an unsecured version if you make your payments consistently. When you convert your card, your deposit should be returned to you in full.

Some secured cards have an annual fee. Others don’t. Some come with a cash back rewards program. Others don’t. Some charge higher annual percentage rates (APRs) and fees. But again, others don’t. In fact, some secured cards may offer significantly lower APRs than unsecured cards.

A secured card that reports your payments to at least one of the three major credit reporting bureaus can help you boost your credit scores if you make your payments on time.

It’s smart to shop around, compare offers, and read the fine print before you choose a secured card — or any card.

9. What Is an Unsecured Credit Card?

An unsecured card is one that doesn’t require a cash deposit. Unsecured cards for people with poor credit tend to have high APRs and fees to compensate the card company for the higher risk.

Most unsecured cards charge a variable APR, which means your interest will change along with the Federal Prime Rate. Fixed-rate APR cards are hard to find and are usually associated with secured accounts or cards from credit unions.

10. What Is a Subprime Credit Card?

Subprime cards are typically marketed to people who have low credit scores. Consumers with a limited credit history or what is called a thin credit file may also turn to subprime credit cards to establish and build credit, though they may have other options (such as a secured credit card or a credit-builder account at a credit union).

Subprime cards tend to have higher APRs, higher fees, lower credit limits, and fewer perks than prime cards for those with higher scores. But not every subprime card suffers from all (or any) of these negatives. Some cards may be weak in one or more areas but still a good value in other ways.

A credit score below 600 will typically mean being stuck with subprime card options. But there’s no one score that all card companies define as subprime.

Rather, companies set their own standards for these cards. Some may have a higher score cutoff, while others may accept lower scores.

Subprime cards may sound less appealing than regular cards, but the subprime variety can help you establish a credit history or raise a low credit score. By charging small amounts each month and always making your minimum monthly payment (but, ideally, more) on time, you can demonstrate responsible use of credit with a subprime card.

11. Do Secured Credit Card Issuers Check Your Credit Report?

The short answer is some do, and some don’t. It just depends on the card company’s practices and policies.

Cards that don’t require a credit check for approval are usually designed for people who have poor credit. Instead of a hard credit check, the company may consider your income or employment history to decide whether to approve you for this type of card.

Cards that are advertised as “no credit needed” may be intended for people who don’t have a credit history, such as young adults. If you apply and your credit is poor, you could still be declined.

12. Do Secured Credit Cards Allow You to Take Cash Advances?

Some secured cards will allow you to take a cash advance, but it will vary by card, so you need to check your cardholder agreement.

If the card allows advances, you’ll need to contact your issuer to establish a PIN before you can use it to withdraw cash. Once you have a PIN, you can typically obtain money at any qualifying ATM or by going to an eligible financial institution to speak with a teller.

With the majority of credit cards, you’ll be charged a fee for this privilege. A fee of $10 or 3% of the cash amount, whichever is higher, is common, though some cards charge more or less than that. Cash advances also typically have a higher interest rate than other transactions, and cash advances don’t qualify for a grace period on interest.

Here is an example of a cash advance APR in a cardmember agreement:

There are two ways to get cash with a secured card without paying a fee. One way is to go with a card that doesn’t charge a cash advance in the first place; this will likely have to be a card from a credit union.

The other way to get cash from your secured card is to recover your deposit. Unfortunately, the only two ways to do this are to graduate your credit card account to an unsecured card (if your card allows upgrades and you’re qualified to do so) or to pay off your balance and close your credit card account.

Either way, your deposit should be refunded, giving you access to that cash.

13. Are there Subprime Cards with No Annual Fee?

Most credit cards designed for people with bad credit will charge an annual fee — unless it’s a secured card. Some credit unions offer subprime borrowers credit cards without annual fees, but you’ll need to be a member and have an account.

Annual fees for subprime cards often range from $39 to $199, and it will show up on your statement each year as a regular purchase would. That means you need to ensure you have enough credit available when it comes around. If you have a $700 credit limit and a $199 annual fee, you could easily get into a credit crunch when the fee comes due in Year 2.

If you’re willing to pay an annual fee, look for one that provides an offsetting benefit, such as a lower APR, a cash back or rewards program, or a higher credit limit. You may also find cards that waive the annual fee for the first year.

14. Can You Get a Rewards or Cash Back Credit Card with Bad Credit?

Yes, you can. But keep in mind that a subprime rewards card will likely come with a higher APR, higher fees, or both. Rewards programs cost issuers money, so they often charge cardholders more to compensate for the rewards they pay out.

Even someone with an excellent credit score will pay a high annual fee for a card with the very best rewards. Read the disclosures carefully to see whether the cash back or rewards program is a good tradeoff for the other terms the card offers.

15. What Is a Debt-to-Income Ratio & How Does It Impact Your Credit Limit?

Your debt-to-income ratio (DTI) compares your monthly income to your monthly minimum debt payments.

Your monthly income may include your:

• Salary
• Hourly wages
• Side hustle (e.g., rideshare driving)
• Hobby business
• Interest and dividends
• Rent from property that you own
• Court-ordered alimony or child support that you receive
• Other income that you receive on a regular basis

Similarly, your monthly debt payments include any payments you are obligated to make each month. This includes things like rent or mortgage payments, car loan payments, student loan payments, court-ordered alimony or child support, minimum credit card payments, or any other regular payments.

Calculating DTI can be complicated, and card issuers don’t all compute it the same way. But you can get a general idea with a little bit of basic math, as in the example below:

A lower DTI means your debt obligations probably aren’t burdensome relative to your income. A higher DTI means you may have more debt than you can manage. The more you increase your income and lower your monthly minimum debt payment obligations, the lower — and healthier — your DTI will be.

Your DTI isn’t used to calculate your credit score, but card companies do consider it when you apply for a new card. If it’s too high, you could be turned down or offered a card with higher fees and less attractive features.

If you’re denied credit because your DTI is too high, you should try to increase your income, pay off some of your debt, or both.

16. How Does a Secured Card Differ from a Prepaid Card or Debit Card?

The principal difference between a secured credit card and a prepaid card or debit card is that the secured card is a form of credit — a type of loan — while the prepaid debit cards are not a form of credit.

This difference is important because of those three options, only the secured card’s history is reported to the three major credit reporting bureaus, which means it is the only one that will appear on your credit report.

Here is a look at a few other areas where these cards differ:

	Secured Credit Cards	Debit Cards	Prepaid Cards
Operated by major issuers	✅	✅	✅
Can use for in-store purchases	✅	✅	✅
Can use for online purchases	✅	✅	✅
Connected to a bank account	✅	✅	❌
Uses a line of credit for purchases	✅	❌	❌
Reports to the credit bureaus	✅	❌	❌
Can impact credit scores	✅	❌	❌
Can carry an outstanding balance	✅	❌	❌

Because prepaid debit cards are not forms of credit, they will never be reported to the bureaus, never appear on your credit report, and never impact your credit score. If your goal is to improve your score, a secured card could help — or hurt, depending on how it’s used. A prepaid card or debit card will have no impact at all.

17. Do You Need a Bank Account to Open a Subprime Credit Card?

The vast majority of credit cards, even those for bad credit, require a checking account to qualify for approval. That’s because most credit cards can only be paid through a bank transfer or by check, and both methods will require a bank account to complete.

That being said, you don’t need an expensive checking account to get a credit card. Many credit unions and online banks provide free and low-cost checking and savings accounts that you can obtain regardless of your credit score.

Editorial Note: Our site content is not provided or commissioned by any credit card issuer(s). Opinions expressed on CardRates.com are the author's alone, not those of any credit card issuer, and have not been reviewed, approved, or otherwise endorsed by credit card issuers. Every reasonable effort has been made to maintain accurate information; however, all credit card offer details, including information about rewards, signup bonuses, introductory offers, and other terms and conditions, is presented without warranty. Clicking on any offer on CardRates.com will direct you to the issuer's website, where you can review the current terms and conditions of the offer.

The information on this page was reviewed for accuracy on February 20, 2025.

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