People with “very good” and “excellent” credit scores get to benefit from the best credit cards out there, with folks in the latter group being able to apply for some of the fanciest financial products ever made and even be rewarded with cash-back and points for using them.
On the other hand, those on the other side of the spectrum (with “low” and “bad” credit scores) don’t have that many options; yet, they too may be able to get a credit card. It is not easy, but it is possible. Here’s a 5-step plan that could work:
Step 1: Know your score
Even before signing-up for a new credit card, you should know where you’re standing. If you have an average credit score, you know you can’t get the best cards that are reserved for those with an “excellent” score. Despite the fact that many premium cards come with a hefty annual fee, that doesn’t mean everyone can get them.
So before applying to any card, get to know your credit score. It will help you know what kind of a card you can get, and perhaps more importantly – what’s out of your reach.
Step 2: Look into other credit factors
If you don’t have a good credit score and want a credit card, banks may offer you some card that you can “play” with. They will, however, be looking into other credit factors before committing a single cent of credit to you.
These other factors include things like whether you owe a home, do you pay your bills regularly, your current credit utilization ratio (the lower the better) and — most importantly — whether you have an open bankruptcy. Also, they will check to see whether you made more than six credit inquiries within the last six months. This will tell them that you have applied for many credit cards and turn on their alarms.
Step 3: Consider a secured credit card
For people with a really bad credit score, their only option is to get a secure credit card. With this sort of financial products, banks have nothing to lose as you first have to make a deposit to use such card; and that deposit is typically equal to the amount of available credit.
On the downside, secured credit cards seldom come with any bells and whistles, but they do help you improve your credit score once you start making regular, on-time payments.
You may also want to try some credit repair service, just be warned that there are many such scams on the internet. Your best bet is to talk to your bank about it and see how they suggest going with your credit repair.
Step 4: Get added as an authorized user
This isn’t really like having your own credit card, but it could work just as well. The idea is to find someone with a good payment history and low debt close to you — a relative, a friend or a very good colleague — who could add you as an authorized user to his/her credit card.
By responsibly using that card, you could improve your credit score, while also benefiting from a few extra features — presuming you have been added as an authorized user to a good credit card.
Step 5: See whether alternatives work for you
People with really bad credit score could be best off forgoing the use of credit card altogether, at least until they get their finances back in order.
Yes, credit cards offer convenience and then some, but you can live perfectly without them. Perhaps, you can “get away” with a debit card, or perhaps you could get an affordable loan and use the good ol’ cash in the meantime.
These are not ideal substitutes for a credit card, but with a “low” or “bad” credit score — you don’t have that many options anyway.