This guest post was written by Jason Bushey. Jason is a personal finance blogger and the Editor of Creditnet.com, a leading online authority on credit card repair.
Bad credit credit cards get an unfair rap, but the fact of the matter is they’re actually some of the most important credit repair tools available for consumers with poor credit.
A bad credit score means poor loan approval odds and high interest rates across the board. Repairing a bad score can take years, but it’s certainly not impossible. The best credit cards for bad credit report your payment history to the major credit bureaus, they’re easy to get approved for and they include credit monitoring tools that help to explain how your credit score is calculated.
There are two ways to go when it comes to bad credit cards: secured and unsecured.
Secured cards require a security deposit upon approval that guarantees your credit line; these security deposits are fully refundable, and the interest fees and annual fees attached to secured cards are generally on the low side. Plus, the best secured credit cards (including the ones featured below) include credit monitoring features that allow consumers to keep track of their score. So while secured cards require an initial cost up front, that’s a small price to pay for the benefits they offer consumers.
Unsecured credit cards, on the other hand, require their own set of fees; some unsecured cards include both annual and monthly fees, and their interest fees are generally higher than similar secured cards. However, there’s less up-front cost for unsecured cards and, while their approval rating is a little lower than secured cards, they’re still the unsecured cards that bad credit consumers are most likely to get approved for.
If you have a bad credit score – which is considered to be anything below 640 – then it’s time to consider applying for a credit card for bad credit. The secured and unsecured cards below are three of the very best options available for consumers with below average credit…
1.) Capital One® Secured MasterCard®
This secured credit card from Capital One is widely regarded as one of the very best cards for credit repair. First and most importantly, your payment and usage activity is reported to each of the three major credit bureaus – Experian, TransUnion and Equifax.
Each month that you use this secured card and make on-time, in-full payments, your new responsible usage is reported to the credit reporting agencies that matter most. (And it’s recommended that you make multiple payments in a month to improve your score even further.) The security deposit required upon approval ranges from $49 to $200 depending your credit worthiness, though the bigger the deposit you put down, odds are the greater your credit line will be.
A higher credit line means a lower credit utilization ratio on your credit profile – that’s the ratio of amounts you owe versus the total amount of credit available to you – and is yet another way in which a secured card can improve your score.
This secured credit card also has minimal fees – the annual fee is currently just $29 – and there’s no setup fee or monthly fee to pay. Plus, the ongoing APR is on the low side for poor credit consumers at 22.9%. Finally, Capital One Secured MasterCard holders will be enrolled in CreditInform®, a credit monitoring tool that allows cardholders to track their score each month and gain a better understanding of their credit score.
Overall, this is perhaps the very best bad credit credit card for repairing scores available today.
2.) First Progress Platinum Prestige Secured MasterCard®
Yet another secured card that reports to all three major credit bureaus, this secured MasterCard from First Progress can help bad or no credit consumers with building and improving their credit profile. There are minimal fees attached to this card – the annual fee is just $44 and there are no monthly fees or setup fees to deal with. The ongoing interest is also very low at 11.99%.
Unfortunately, this card doesn’t include the aforementioned credit monitoring tools. Also, the minimum deposit required is a little higher at $300, and it’s not currently available in New York, Iowa, Arizona or Wisconsin. Otherwise, this is an excellent credit card for consumers with bad or no credit hoping to get in the good graces of creditors.
3.) Continental Finance Matrix Discover Card
For bad credit consumers unwilling or unable to front a security deposit, the next available option are unsecured credit cards like the Continental Finance Matrix Discover Card.
This card has some serious pros and cons, but the fact is it does report to all three major credit bureaus and if you pay your bill in full each month (as is always recommended), then the high interest fees (29.99%) won’t be a factor.
The credit line offered to most consumers is low, and there is both an annual fee ($75) and a $12 monthly maintenance fee (waived for the first year) to deal with; unfortunately that’s the price poor credit consumers pay to rebuild their score. And considering how much an improved score can save you over the long haul in lowered interest rates, it could turn out to be a worthwhile investment when uses responsibly.
Overall, bad credit credit cards are perhaps the best credit repair tools for consumers with poor scores. They lower your credit utilization, diversify your credit accounts open and give consumers one more opportunity to prove themselves to lenders. The above bad credit cards are three solid options available to bad or no credit consumers that are serious about improving their scores.