How to get a credit card if you have bad credit
A low FICO score does not mean you don’t have access to credit
No one purposely desires to have a low credit score or bad credit. However, with the economy we find ourselves in, more people are falling into the ‘less-than-good credit score categories these days. But, there’s some hope for those who have bad credit scores. You can still get a credit card with bad credit.
Geoff Williams is the co-author of the book “Living Well with Bad Credit.” He says, “We tend to think of money problems as a character flaw, But we’ve all found out in the past two years that money problems can happen to anyone.” So you see, the industry understands that just because you have bad credit doesn’t necessarily mean you’re untrustworthy.
Peter Garuccio is spokesman with the American Bankers Association. He says that while you may not even bother applying for a credit card, thinking it will be insta-declined, the truth is you have options. “There are still a lot of offers out there” he says. His suggestions? 1.) Your personal bank, or 2.) Your local credit union.
Here’s some things to remember
Sob stories work
If you know your credit report has some nasties on it, like 60 day+ late payments or a loan default, you might still be able to get a card by simply by explaining the situation and reasons behind your financial difficulties. It’s a little known fact, as a consumer, you can add a 100 word statement to your credit report, letting potential credit partners know the story behind your report. Anyone who pulls a credit report is supposed to read that statement and consider it in making a credit decision. That’s why you never see “Sorry you’re declined” notices instantly, you just get the dreaded ”we are unable to approve you instantly.” This is because, by statute, someone is actually supposed to look at the thing. This isn’t all automated.
So what should you say in this golden blurb? Quite simply, something like, “Look, the economy of such-and-such year killed my credit. I lost my job and or the amount of work I had tanked and am still trying to catch up, but if you look you’ll see before this happened, I was always on time with my bills.’” Creditors may also be more willing to overlook bad credit if the circumstances were unrelated to your spending habits. Divorce and Illness are two reasons that most creditors will understand is not just you being irresponsible.
Couldn’t make this method work for you? Don’t worry, there are other options.
Secured credit cards allow you deposit a sum of your own money into a account similar to a savings account. A credit lender then issues you a card with a credit line that’s equal to (or sometimes a bit higher) than the amount you deposited. Bad credit isn’t really an issue, because you’re putting the money up to secure the line.
This method can get your credit from zero to hero in just under a year. Even 100 point boosts are possible with good judgement in 9 months.
Because of the economy, many issuers of secured credit cards have used this to their economic advantage, and added upfront fees for secured deposits, making them slightly less accessible. Also, expect to pay an annual fee of some sort, but the goal is to try to avoid insane upfront costs.
The other thing you need to make sure of, is that the card issuer reports to at least 1 credit bureau. The whole point of getting the card is to regain credit, this would be a wasted effort if they didn’t report. After a year or so of using the secured card, you can even go back to the same credit issuer and try to get an unsecured card, as many of them offer both.
Not into secured cards? There’s another way.
Subprime credit cards are another option for people with bad credit. Sometimes these are called fee-harvesting cred cards, because they are chock full of various fees and charges. Up front fees, annual fees, one-time fees. You name it, you’ll find the surcharge in the fine text. The Credit Card Act of 2009 made a few positive changes, capping their upfront fees to 25 percent of the card’s limit, but subprime card issuers can still raise interest rates to limit their risk. If you end up with a subprime card, the goal is 1.) Get the card, 2.) Put something on it, 3.) Pay it off, and wait till your credit improves to get a better card.
Another option? So simple it’s crazy. Wait a few months, using that time to pay down debt, make on-time payments, and get your score up. This method will rebuild credit history, and pay down some of the debt that got you into the mess in the first place.
