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Comparing Credit Cards: A Guide for Low Credit Scores

You can end up with a low credit score for any number of reasons: bad luck, credit fraud, a health emergency.

Don't worry though!

The way it happened is in the past and we can help you rebuild your score now.

About 30% of American consumers have "bad" or "poor" credit  (under 650), according to Christina DiGangi of Fox Business

That means you're not alone and there are options out there to help you reset the course to improve your credit history.

Still, equally unhelpful and risky is to jump in head over heels before you check out the ground under your feet.

Applying for as many cards as possible will likely leave you with a worse score than when you started.

And applying for the first card that fits your criteria could leave you with locked into a half-rate card that might make your score rebuild extra difficult.

With low credit, an aggressive credit-rebuilding strategy is possible but requires a smart solid foundation of knowledge so you can ensure you pick the right credit card for your specific situation.

Everything You Need To Know

Delicious cooking takes sharp and steady prep work. A show-stopping performance takes dozens of rehearsals. The same goes for an excellent credit score.

Knowing the lay of the land and building a solid financial strategy is the key to making any credit card a boon to your wallet.

Know the WHY of your credit score. Of course, the first step is getting a credit check and learning what your score is — check out this quick and free credit score tool to do that if you haven't.

You can also get a free credit report from AnnualCreditReport.com if you'd like to see your score from another credit reporting agency besides Transunion.

Once you have your report in-hand, the real work is determining why your score is what it is.

Credit score distribution by age

The two most important factors likely hurting your score are past payment history — have you paid your bills on time? — and the amount owed — do you carry a sizable amount of debt?

Those two make up a whopping 65% of your score!

There's a number of other factors including your credit utilization ratio, credit mix, and new credit — so make sure to check out this comprehensive guide about how to improve your score.

Do your budgeting homework. Trying to find the best credit card to boost your score before you've gotten a grip on your finances is a bit like building the roof of a house before you've laid the foundation.

It's a common misconception that credit cards improve your score. A credit card can improve your score.

But it can just as easily sink your score.

For example, a shiny introductory offer might be worth hundreds in rewards might lure you in, only for you to find out a few months later that it required a crazy amount of spending to qualify that was outside your budget in the first place.

Or, perhaps you already have a high-interest card that's carrying a balance and a balance transfer card catches your eye.

For a year, the new low-interest rate is working out great, but then suddenly the introductory offer ends and you're hit with an even higher rate on the remaining balance.

As you can see, fundamentally, it comes down to reading the fine print before you apply and (2) how it's used once in your wallet.

To win at those two things, the key is making sure you're on top of your finances.

There are tons of methods to get a handle on your income, expenses, and debt.

Many experts recommend the 50/30/20 rule as a well-worn financial formula, and others point to the snowball method as a great way to pay down your debts.

The 50/30/20 rule of budgeting

These days there are tons of digital tools, like Mint, that help streamline the process by analyzing how you spend your money.

Don't procrastinate on saving. A focus on building up an emergency fund is crucial so you're never forced to max out a credit card (or two!) after a tree falls on your car or your daughter breaks her arm.

Moreover, with a healthy emergency fund, you can safely carry a more powerful credit card that packs in more rewards.

According to Grayson Bell, writing for Debt Roundup, you should ideally save 6 months worth of living expenses, but if that's not possible, a $1,000 emergency fund could do the trick in the short term.

As Bell says, when you put an emergency expense on plastic, "you are essentially knowing that you will be paying much more for your emergency. If you don't have a 0% APR card, then you will be paying interest."

Make sure you're not overqualified. There are a number of FICO credit score ranges, each separated from the next by just a single point, which makes it all too easy to make a mistake while identifying what range you fall into.

Moreover, if you're straddling two ranges, it's likely not clear which range you belong to.

A FICO credit score between 580-629 is considered "poor" or "low" credit, while 630-689 is considered "fair" or "average" credit.

And this isn't just a superficial identifier: credit card issuers (among other lenders) use these ranges to assess your creditworthiness, while you use it to consider the quality of credit card you'll likely qualify for.

And ending up with a card you're overqualified for can really come back to hurt.

Many of these low-score cards will require security deposits or come with higher-than-average APRs.

That means you could end up paying more money than necessary to simply get the card or maintain a balance.

The first order of business is making sure you're looking at cards that are within your specific credit rating range.

Four things to pay attention to so you can pick the best low-score credit card

The main goal of any low-score credit card is to help you rebuild credit. So it might surprise you to learn that all cards don't do that job equally well.

That's why before you pay attention to any rewards or perks, it's crucial you dig into the less-advertised basics of any card you're considering.

Does the card issuer report to all three credit bureaus. There are three major credit bureaus — Experian, Equifax, and TransUnion — whom credit issuers report your credit activity to.

The catch is that all credit issuers do not necessarily report to all three bureaus. To add to the confusion and inconsistency, when lenders pull your credit report to assess your creditworthiness, most typically pull from one specific credit bureau.

What this means practically is that all three bureaus have different data (and different formulas) to calculate your score, and therefore your score is likely slightly different at each bureau.

So we don't risk boring you to death with all this minutia, the point is that it's a good idea to double check that the card you choose reports to all three bureaus while you're reestablishing your credit, as Bankrate writer Janna Herron points out.

"In general, most major banks report to all three credit bureaus. But smaller regional banks and credit unions may only report to one or two credit bureaus. There are some lenders and others that don't report at all."

Secured Cards

While it's possible to find a low-score unsecured credit card with decent terms, it's unlikely.

The safer path for those with poor credit is a secured card, which is backed by some type of collateral, typically a cash deposit.

This deposit similar to a security deposit a landlord requires before you can rent an apartment, and functions to reduce the risk to the credit card issuer by providing a safety net to draw from if you end up not paying your bill.

Amanda Page, writing for mybanktracker.com, says the key point to pay attention to with secured cards is the deposit details.

"Most secured cards require a deposit in the range of $250 to $1,000. If you're just starting to build credit, you'll most likely be approved for a card at the lower end of that scale," Page says.

Balance Transfer Discounts

Balance transfers are probably one of the least understood and thus most ignored credit card feature.

But if you're carrying a big balance on a high APR credit card, a balance transfer credit card can help you move that debt to lower interest (or even no interest!) card and save you hundreds of dollars in the medium term while you pay down your debt.

Still, as cardratings.com writer Mitch Lipka advises, reading the fine print is key to not getting hit with big fees or an even higher interest rate once the introductory balance transfer offer ends.

In other words, the length of the introductory offer — for instance 15 months versus 12 months — is arguably a more valuable perk than avoiding a flat transfer fee altogether.

Affordability is likely the biggest reward for now. While it's unlikely low-score credit cards will come with reward programs, that doesn't mean card issuers won't try to tempt you with some sort of cash-back or points offer.

With low-score cards though, these sorts of rewards programs will likely come with huge tradeoffs — think a hefty annual fee, APR, or hidden costs — that will more than likely cancel out the rewards.

For now, as you work to rebuild your score, your best bet is picking a card with the best rates and lowest fees.

That way, you can focus on building that emergency fund rather than getting drawn into another big purchase.

Average APR per credit card type

Reap the Rewards

Perhaps not rewards in the typical sense of a credit card, low-score credit card benefits might not help you accumulate points or miles toward your next big purchase or vacation — at least not directly.

But they still can save you real dollars, and in the long run, help you reestablish your credit so you can graduate to a better unsecured card with a rewards program.

The trick is proving to your card issuer that you're a responsible consumer. good credit behavior

Build back your credit. There's no one-stop shop for building back your credit.

It takes a multi-pronged financial strategy — from credit cards to secured loans perhaps — and most of all, time.

Rebecca Lake, writing for Smart Asset, says that the key attitude to hammer home while working on your credit is patience and persistence.

"Don't expect banks to give you the benefit of the doubt when it comes to credit, though.

You'll have to prove your credit-worthiness by starting small and paying your bills consistently."

There's no amount of miles, points, or cash-back that equals the reward of a better credit score.

Reestablishing your credit into the high 600s and even 700s will allow you to buy the home and car you want, and potentially save you hundreds of dollars in extra or exorbitant interest payments.

Grow your credit limit month-to-month. While it's not a certainty you'll end up with a secured credit card, if you do, one of the most basic yet helpful rewards is growing your credit limit.

Initially, your credit limit will usually equal the deposit you put down, which typically ranges from $200-500.

That can seriously limit your spending since as Ash Cash of Cassius reminds us, the key is "staying between 20% and 30% of your credit limit in order to keep your [credit utilization] ratio in good standing."

That's why finding a secured card issuer that allows you to grow your credit limit is crucial.

After a couple months of good credit behavior, many issuers will offer you the option to deposit more money in exchange for a higher limit.

The trick is doing the research ahead of time about which issuers permit this and how many months of good payment behavior it takes before you can start growing your credit limit.

Graduate smoothly to a rewards credit card. As you might be noticing, we're talking a lot about secured cards.

That's because they're a safe bet for low credit score applicants and typically won't carry the high fees and rates that come with low-score unsecured cards.

Don't feel down though!

While it might take a year or so of impeccable credit behavior (along with an aggressive repayment plan if you're carrying debt), the end goal of any secured card user is to graduate to a killer rewards credit card.

Jason Steele, writing for credit.com, says rather than starting your card search all over again, you shouldn't hesitate to talk to your current card issuer after some time to see what your graduation options are.

"If your secured card was issued by a bank or credit union that also issues standard credit cards, it may be the first place you want to apply for an unsecured card. "

Get ready to dive in. Now that you have the knowledge and skills to compare low-score credit cards, we've gone ahead and put together four of the best cards out there to consider for your credit rebuild.

Credit cards in circulation

The Capital One Secured Mastercard is for slow and steady credit builder

This secured card is for the consumer trying to get a handle on their finances at a slower pace and perhaps can't afford a huge deposit.

The small credit limit will be a drawback for some, but likely a perk for those looking to help get a curb on their spending or get approved for a secured card without draining their savings on the deposit.

The APR is super high but with such a small credit limit, you shouldn't be keeping a balance on this card anyway.

Notable fine print

Annual fee. $0 — lowest end of the range

Deposit range (min-max). $49-200 — lowest end of the range

APR. 24.99% — toward the higher end of the range

Perks

  • You are guaranteed an initial $200 credit line after making a security deposit of $49, $99, or $200, depending on your credit
  • If you can't afford to put down the whole deposit upfront, you can pay it in multiple installments before activating your card
  • Grow your credit limit if you make your first five payments on time

Drawbacks

  • Pay a max late fee of $35
  • Even if you can make the deposit, without a checking or savings account you likely won't be approved

What experts say

Beverly Harzog, writing for her personal finance blog, highlights the higher than normal APR as a potential pitfall depending on how you use the card.

"The Capital One Secured MasterCard isn't the best card out there when it comes to the APR, but it's an excellent secured credit card if you don't carry a balance."

What consumers say

Sandy11, from Seattle, WA, wrote about a good customer service experience she had.

"Every time I call, I am wonderfully served and helped. My only problem is that when I go online, my password never works and I have to find a new one, and that is annoying!"

How to apply

Head over to the Capital One website to apply and learn more.

The Discover it Secured card is for the average credit score consumer

If you can afford the deposit required without wiping out your emergency savings, this card competes, if not trumps the Capital One Quicksilver Cash Rewards card above.

There's no annual fee, the APR is slightly lower, and you earn slightly higher rewards on fall around.

Notable fine print

Annual fee. $0 — lowest end of the range

Deposit range (min-max). $200-500 — average range

APR. 23.99% (variable) — toward the higher end of the range

Perks

  • Earn 2% cash back on food and gas up to $1,000 in combined purchases each quarter
  • Earn 1% cash back on all your other purchases
  • Earn $1 cash back for every dollar you spend in your first year, automatically

Average expenditures on food and gas

Drawbacks

  • Pay a max late fee of $37
  • The credit range is potentially limited if you're making more money than your credit lets on

What experts say

Most syndicated review sites highly recommend the Discover it secured card.

J.R. Duren writing for highya.com says there are few if any cards as good for people with bad credit.

"First, Discover's cash rewards and first-year matching can help you earn anywhere from $80 to $160 in your first year. Second, the card's absence of an annual fee is an anomaly in the world of secured credit cards."

What consumers say

Annaaa, writing on creditkarma.com, outlined how she used the Discover it card to help rebuild her credit.

"I applied for a $200 limit and was approved within 3 days and received the card in the mail within 7. When I first applied my credit score was at 513 and it is now at 721 within one month!

"I plan to keep it that way by only utilizing 30% or less and paying it off each month. Once i have the card a little longer I will be back to update my review by for now I give it 5 stars!"

How to apply

Head over to the Discover it website to apply and learn more.

Open Sky Visa Secured card is for the consumer who can't avoid keeping a balance

With one of the lowest APRs out there for people with low credit, the Open Sky Visa is great if you plan to keep a balance on your card.

That being said, 18.39% is not low in the broader context so it's best considered an emergency perk in case you need to only pay the minimum one month.

Notable fine print

Annual fee. $35 — higher end of the range

Deposit range (min-max). $200-3,000 — higher end of the range

APR. 18.39% (variable) — lower end of the range

Perks

  • Build credit fast with monthly reporting to all three major bureaus
  • Apply to increase your credit line up to $5,000

Drawbacks

  • Pay a max late fee of $27
  • Pay an annual fee, despite it being small

What experts say

Matthew Frankel at The Motley Fool says that if you're thinking about eventually applying for an unsecured card, the Open Sky Visa's issuing bank, Capital One, currently doesn't offer one.

That means you would have to either stick with the secured card or change banks down the road.

"If you have a secured card from one of the larger banks mentioned above, it may be possible to eventually move to an unsecured card without having to reapply at another institution.

Credit card transactions

JCB - 2.6%

Diners/Discover - 2.2%

What consumers say

Consumer reviews were a mixed bag. Susan K. over at sitejabber.com offered an ode to how the card gave her a financial future.

"I can't believe all the negative reviews so i had to jump on and put my piece in as someone who has only benefited from getting this card.

"This card is not meant for big spending, a ton of usage, partial payments bla bla bla this is meant for ppl who are trying to build or rebuild a credit history and /or repair past mistakes."

How to apply

Head over to the Capital Bank website to learn more and apply.

The Milestone Gold Mastercard is for the consumer who can't afford a secured card deposit

This card is worth checking out no matter what because you can see if you pre-qualify without hurting your credit score.

Similar to the Credit One Bank unsecured card, it offers a slightly smaller range for its annual fee (pending good credit behavior) and an APR lower than the rest of unsecured cards for people with poor credit.

Notable fine print

Annual fee. $35-99 — average

APR. 23.90% — lower end of the range

Perks

  • Get pre-qualified without dinging your score with a "hard pull"
  • Pay a $0 cash advance fee during the first year (then $5 or 5% after that)

Drawbacks

  • After the first year, the annual fee will jump to $99
  • There may be an account opening fee of $5, $25, or $50 depending on your credit
  • Pay a max late fee of $38

What experts say

Monica Kowollik, writing for Credit Fast, rated the card four stars because of the fees.

"It would be wiser to accept a credit card offer without an annual fee.

"However, not everyone has a credit rating high enough.

"If you do not qualify with your current credit score for a no-fee credit card, I would recommend applying for a Milestone card.

"Credit Fast feels that the Milestone Credit Card offers an individual a decent chance to rebuild credit at a reasonable cost. There are other credit cards for less than perfect credit that have much higher fees."

What consumers say

The user 'secure', writing on Creditinfo Center, was pleasantly surprised they got approved for the card.

"I got approved for an unsecured credit card called milestone gold master card…My scores are pretty low, TU FICO 601, credit karma-597, credit sesame 604. It's just a sub prime card, with a low limit of $300 and $75 annual fee.

"If I got approved for the milestone card, I think anyone can with low scores. Am not going to apply for any more cards, I just wanted some open TL showing while am working to get all or most of my baddies off my CR."

How to apply

Head over to the Milestone website to see if you pre-qualify.

Pick Your Card

There's nothing to wait for. Reestablishing your credit is not an overnight process, but if you start today you're one day closer to that "excellent" 700+ score, and the rewards and freedom that come along with it.

To recap, here are the key steps to make sure you pick the right card:

Know your score. You get three free credit reports per year so make sure you make use of them. Without your credit report and score, you could end up applying for a card you're over- or under-qualified for.

Check out our free credit check tool to learn your score.

Fix your score. Don't just assume your score is accurate!

The credit bureaus unfortunately often make mistakes and it's on you to catch them.

Get on top of your debt and utilization. The two factors likely hurting your score most are payment history — have you paid your bills on time? — and the amount owed — do you carry a sizable amount of debt?

They make up a whopping 65% of your score!

Credit score

Choose a card based on your score and plans. Once your score is accurate, the next step is picking the right card for your personal credit rebuild strategy.

Make sure you read all the fine print if there's an introductory offer!

Now that you might have an idea about how to compare credit cards for low credit scores, it's time to learn how to take full advantage of its perks and avoid its pitfalls.

Check out these great articles to learn:

Do you have a low or average credit score?

What's your story?

Any tips or strategies you've used to climb out of debt or rebuild your score?

Drop us a comment below.


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