To rebuild a bad credit history, you must begin adding positive information to your credit score. The more positive information you can add, the more your credit score will improve. The trouble is finding credit cards for rebuilding bad credit. The majority of credit cards on the market are for people with good to excellent credit scores. Finding credit cards for rebuilding credit isn’t always easy. But, there are some credit cards out there that approve people who are rebuilding their credit.
Credit Cards for Bad Credit
Capital One has two credit cards with a reputation for approving applicants with poor credit scores. The Capital One Classic Platinum MasterCard and the Capital One Standard Platinum Card are very similar. The Standard card has a $19 annual fee and a 24.9% interest rate while the Classic card has a $39 annual fee and interest rates between 17.9% and 22.9%. Both cards are designed for applicants who’ve had late payments, loan default, bankruptcy, or limited credit history. If you’re approved, you’ll get at least a $300 credit limit.
Orchard Bank also has a line of credit cards aimed at applicants with bad credit history – the Classic, Gold and Platinum MasterCards. With Orchard Bank’s application process, you don’t choose the card. Instead, the bank lets you know which credit card you qualify for based on your credit history. If you don’t qualify for any of their unsecured credit card options, you’ll be offered their secured credit card.
Secured Credit Cards
Secured credit cards are good options for rebuilding credit because they typically don’t require a credit check. If you have enough money for a security deposit, then you can get a secured credit card. (Your deposit could be as low as $49 on the Capital One Secured MasterCard.)
Secured credit cards behave like regular credit cards. The difference is that you have a security deposit against the credit limit on the card. The deposit is put in a savings account and only used if you default on your credit card. Otherwise, your purchases go against your credit limit.
There are several good secured credit cards on the market – the Orchard Bank Secured MasterCard, Walls Fargo Secured Credit Card, and the Capital One Secured MasterCard made our list of best secured credit cards. Look for a secured card that reports to the major credit bureaus, has low annual fees, and converts to an unsecured credit card after a period of timely payments.
Other Credit Card Options
Retail credit cards are an option, but the high interest rate and limited use make them less attractive than other credit cards for rebuilding credit. Use these as a last resort.
Watch out for credit cards like the Applied Bank Gold Visa that charge extremely high annual fees relative to the credit limit – a $125 annual fee for a $500 credit limit in this case. These cards provide little benefit compared to the exorbitant cost you pay.
Finally, prepaid cards are a credit card or checking account alternative that can be used to make credit card and debit card type purchases. However, these cards don’t improve your credit score – at least not the mainstream credit score that most lenders use to approve your applications.