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Rebuilding your credit score is a top priority for many Americans with bad or poor credit. A higher credit score unlocks premium credit card offers with rich rewards, high credit limits, and low interest rates. The key to taking back control of your personal finances is about choosing the right credit card for good financial habits. Here are important factors to consider when apply for a credit card if you have bad credit:
1. No Security Deposit
2. Low Annual Fee
3. High Credit Limit
Applying for an unsecured credit card will help you avoid putting down a deposit to open your card and therefore keep more money in your pocket. By avoiding a down payment you can put that money towards paying off your credit card each month. Making timely payments will help you improve your credit score.
Similarly, avoiding paying higher annual fees for these cards if you can avoid it. Given these cards are willing to lend to you with poor credit history, it is customary to pay some sort of annual fee upfront to ensure the bank recovers part of it’s losses if you were to stop paying your balance. Accept that you will probably have to pay an annual fee initially to get these cards but understanding that if you use these cards responsibly you will be able to improve your credit score and then apply for a better credit card for fair credit.
One of the primary considerations for our picking these cards as best in their class is their larger unsecured credit limits. The best of these cards won’t require a deposit to open them and you could be approved for a higher credit limit than what is available on most cards for bad credit.
In addition to access to credit, these cards provide numerous benefits to help you get back on track financially. The most important feature is free access to monitor your credit score. Once you are accepted for one of these cards, you should be able to log into your online portal to view account preferences. Usually in the profile section of the portal, you will be able to see your current credit score and can check back in each month to see changes.
To improve your score quickly, you should have a plan to pay off your credit card in full at the end of each month. If that’s not possible every month, at the least you should make the minimum payment on your card to avoid excessive interest charges. You don’t need to take any further steps to ensure your responsible payments will be recorded because these cards automatically report to credit bureaus.
To practice good personal financial habits and ultimately improve your credit score, we highly recommend that you be the only person using your credit card. Credit cards often come with additional user authorization fees that you want to avoid. More importantly, it’s good practice to be the only person using your credit card so you can best control your spending.
Keeping your spending low even if you are approved for a higher credit limit is a great way to improve your credit score because it demonstrates responsible use. An important factor in your credit score is your credit utilization ratio, which is simply the amount of available credit you have used divided by the total credit available to you.
For example, if you’ve spent $350 this month on your card and have been approved for a $700 credit limit, you have a 50% credit utilization ratio. We strongly encourage you to keep a 30% to 35% credit utilization ratio to maximize positive increases to your credit score. Over time, you can apply for more credit cards to increase your total credit available to you. If you keep your spending level constant, you will effectively lower your credit utilization ratio, which should help improve your credit score even more.