A bad credit score doesn’t mean credit cards are out of the question. Learn how you can get approved for a credit card regardless of your score and then use it to improve your credit.

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If you have a bad credit score, you can find yourself in one of those catch-22 situations. The most effective way to improve your score is to get a credit card and use it responsibly, but card issuers may decline your application because your score isn’t high enough.

Although this situation can be frustrating, it’s a mistake to try to make due with a bad credit score and no credit card, because there are credit cards specifically intended for consumers with bad credit. By applying for one and adopting the right habits going forward, you can rebuild your score and put yourself in a much better position financially.

Why you can trust me

Since I’ve reached adulthood and learned what kind of opportunities great credit can create, having and maintaining a high credit score has been a personal mission of mine. Among the many possible benefits a high score offers, I wanted to get approved for the best travel credit cards and pay the lowest, “on approved credit” deposit amount when renting an apartment.

Like everyone, I started with no credit to my name. Within a few years, I had an excellent score (above 720), and I’ve stayed in that range ever since. I’ve researched all the factors that contribute to credit scores and analyzed the kinds of scores necessary to qualify for different credit cards.

Types of credit scores

Before we get into improving your credit score, it’s important to understand that there are multiple types of credit scores out there.

The most widely used is your FICO score, which is on a scale from 300 to 850. Each of the three credit bureaus (Equifax, Experian, and TransUnion) generate separate FICO scores for you based on the information they have in their files.

Those credit bureaus also created a separate scoring system, called the VantageScore. It originally was on a 501 to 990 scale, and then it transitioned to the same 300 to 850 range as FICO. This system isn’t used much due to how dominant FICO is, but many of the free credit score sites provide your VantageScore instead of your FICO score.

While FICO and VantageScore use the same factors in determining credit scores, they weigh those factors differently. You should make sure you know what your FICO score is, since that’s the one that will matter most.

What is considered a bad credit score?

For the most part, anything under 620 is considered a bad FICO score.

There’s no exact definition of a bad credit score, because that depends on who’s checking your score in the first place. Banks, lenders, and other parties who check your credit all have their own credit score classifications. One may set their bad credit score cutoff at 600 and another at 620.

Best credit cards for bad credit

The best credit cards for bad credit are secured credit cards, as they give you a much greater chance of approval than unsecured credit cards.

Most credit cards are unsecured, meaning the card issuer lets you spend up to your credit limit and doesn’t require any collateral from you. They’re relying on your personal guarantee that you’ll pay back what you borrow.

Secured credit cards, on the other hand, require you to pay a cash deposit upfront. In many cases, the amount of the deposit will equal your credit limit on the card.

This security deposit protects the card issuer if you default on your bill. It can also be good motivation for you to make your payment on time.

Types of credit cards for bad credit

There are several options to consider with bad credit, even though I’d only recommend a select few. I’ve covered the most popular options below.

Secured credit cards

We went over these above, and many popular card issuers offer secured credit cards for customers that need them. Two of our favorites are the Discover it® Secured and the Capital One® Secured Mastercard®.

Credit cards from credit unions

Credit unions tend to be more lenient about who they approve for a credit card. Their cards typically don’t have much in the way of rewards and other benefits, but that’s common with almost all credit cards for bad credit.

Your odds are better if you’re already a customer of that credit union. Since you’ve built up a relationship with them, they’ll have more incentive to help you get a credit card and keep you happy.

Basic unsecured credit cards

There are unsecured credit cards for people with bad credit available, but you should carefully look over the fees before you apply. Some unscrupulous card issuers tack on hefty extra charges, such as maintenance fees. In doing so, they take advantage of consumers who don’t have many options.

Credit One Bank is the only card issuer I’ve found that has unsecured credit cards for bad credit available without all kinds of fees. Its cards do still have annual fees between $0 and $75 in the first year and $0 to $99 in every year thereafter, which is why I’d pick a secured credit card instead. You’ll need to pay more upfront for the deposit, but at least that’s money you can get back later.

An alternative option - - Fingerhut credit lines

One last way to build your credit is a credit line with the online merchant Fingerhut. It has two credit lines available, but both require you to purchase a product from the Fingerhut site. You can then pay your purchase off immediately or make payments on it. I wouldn’t recommend the latter, though, as the APR is a steep 29.99%.

The upside with Fingerhut is that you have a high chance of approval on a credit line. The downside is that you’ll need to buy something on Fingerhut to build your credit, and the products tend to be overpriced. Plus if you’re on a tight budget, you probably aren’t interested in buying some random item online.

How you can rebuild your credit with credit cards

The two factors that weigh most heavily towards your FICO score are:

• Payment history -- Paying bills on time makes up 35% of your score, but this only includes bills that get reported to the credit bureaus.

• Credit utilization -- The amount of your available credit that you’re using at any one time makes up 30% of your score.

For payment history, rent and utilities bills usually aren’t reported to the credit bureaus unless you don’t pay and your account goes to collections. Payments on loans and lines of credit are reported, so you should ideally have at least one of those to build your payment history.

If you don’t have either, it makes more sense to get a credit card than a loan, because you can avoid any interest with a credit card by paying the balance every month. With a loan, you’ll almost always need to pay interest.

Even if you have a loan you’re repaying, adding a credit card to the mix could improve your credit score. Since installment loans and revolving lines of credit work differently, using and repaying both looks good to the credit bureaus. I wouldn’t say that you need to get a credit card if you already have a loan, but it’s worth thinking about.

When you have a credit card, improving your score is a simple, albeit not necessarily an easy, process.

1. Use your credit card for at least one purchase every billing cycle.

You need a bill to pay if you’re going to build a positive payment history. Using your credit card consistently, and then paying it off, will create a cycle of borrowing and repaying money.

By the way, you don’t need to continue using your credit card if you currently have balances on it. So, if you’ve accumulated credit card debt, you can focus on paying that down without needing to make new charges every month.

2. Aim to keep your credit utilization low.

The quickest way to boost your credit score is to reduce your credit utilization. While a good payment history requires months to years of on-time payments, going from 50% credit utilization to 10% credit utilization could cause an almost immediate spike in your credit score.

The reason is that credit bureaus only go by your current utilization when calculating your credit score. They don’t factor in past credit utilization, so that can’t work against you once you correct it.

The usual guideline on credit utilization is to keep it below 30% of your available credit.

3. Pay your bill by the due date.

Technically, credit card issuers can’t report your payment late until it’s at least 30 days past due, which means missing a payment by a couple days isn’t a reason to panic. But I’ve never met anyone who likes paying late fees, and your card issuer can charge you one of those the second you miss your due date.

Get into the habit of paying your bill on time or early every month. If you have trouble remembering, set up a reminder on your phone or schedule automatic payments.

Do certain credit cards build your credit faster than others?

No. The effect a credit card has on your credit depends entirely on how you use it, not on the card itself.

The only reason secured credit cards are the best option for bad credit is because it’s easier to qualify for them. They won’t raise your credit score faster than any other card would.

This means that if you already have a credit card, you don’t need to get a new one to rebuild your credit. You can use the one you already have, pay the bill by the due date, and work on reducing any credit card debt you’re currently carrying around.

The only time when you should apply for a new card with bad credit is when you either don’t currently have a credit card or you want to get rid of your current card because of its fees.

Steps to take before applying for a credit card

You should never apply for a credit card on a whim, and it’s even more important to be careful when you already have a low score. After all, credit card applications bring your score down a bit, so applying for the wrong card can make a difficult situation worse.

Before you apply, you should go through these steps:

1. Check your credit score.

Several card issuers, websites, and smartphone apps can tell you your credit score free of charge. I use Credit Journey, which is available to Chase cardholders, but Discover also has a free service that you can use whether you’re a cardholder or not. The budgeting app Mint is another popular choice.

Even if you know your credit score isn’t good, you still need to know where you stand. There’s a big difference in what credit cards you’ll qualify for with a score of 600 compared to a score of 480. Most of these services also provide information on what factors are bringing down your credit score.

2. Request your credit reports.

As you might already know, you’re entitled to a free credit report every year from each of the three credit bureaus (Equifax, Experian, and TransUnion). You can request your report through each bureau’s site.

The reason to do this is to ensure that there aren’t any errors on your credit report impacting your score. If there are, getting them fixed could make a difference right away.

3. Decide on a credit card.

Once you have a handle on where your credit score is and what you need to do to improve it, you can figure out which credit cards you’d have a realistic chance at getting.

Features to look for in credit cards for bad credit

Low or no annual fee -- Credit cards intended for repairing credit aren’t known for having big rewards rates and sign-up bonuses, so it’s best if you can find one that you don’t need to pay for. And if you get a card with no annual fee, you can keep it open even after you’ve improved your credit. This can be beneficial for your credit, because one factor that contributes to your score is your average account history length.

Potential to graduate from secured to unsecured -- With some secured credit cards, you can graduate to an unsecured version of the same card if you pay on time consistently. Graduation, in this case, refers to the card issuer refunding your security deposit and not a grand ceremony your loved ones can attend. Still, this is good for you because you can get your money back without canceling the card and losing its account history.

Reasonable APR -- You’ll ideally be paying your bill in full every month to avoid interest, but just in case, it’s nice to have a card that doesn’t have a sky-high APR. The intro APR is particularly important if you’re planning to transfer balances and consolidate your credit card debt (do the math on what you’ll save before you do this, as balance transfer fees can get expensive).

Getting your credit back on track

While a bad credit score leaves you with a much more limited credit card selection, you can still get one if you know where to look. And when you use it correctly, your credit card can be a valuable tool to increase your credit score.

If you’re starting from scratch with a bad credit score and no credit card, here’s what you should do:

1. Get a secured credit card -- ideally one that comes without an annual fee and can eventually graduate to an unsecured credit card.

2. Use your card every month without exceeding 30% credit utilization.

3. Pay the bill on time, every time to avoid interest charges.

It could take months or more than a year, but if you stick with this strategy and don’t miss payments on your other bills, you’ll see your score begin to go higher and higher.

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