Can I Apply for an Unsecured Credit Card with Really Bad Credit to Get My Credit Score Up?
Can i apply for a unsecured credit card with really bad credit to get my credit up?
Thanks,
Yvette
Hi there, Yvette! Can I ask a question right off the top? How bad is bad? I won’t play Tim Roth in “Lie To Me” and act like I can’t deal with your problem until I get a proper answer, but it would be nice to know. With that said, we’ll kind of deal with all sorts of bad, what things you can do about it, and how to rebuild credit with credit cards. It’s a delicate process (because you could be in pretty deep), but it’s a fixable problem over the long term.
The Bad, The Worse And The Ugly
Alright, let’s say your credit score is in the low 500’s. That’s pretty bad, but it’s not the end of the road. You are not completely disqualified from everything. (Speaking from personal experience, a friend’s credit was so low that a bank wouldn’t even give them a checking account. So, you’re probably doing better than that.) However, you do have a ways to go. If you’re in the low 500’s you probably have many outstanding debts and some charge-offs that are not pretty. We’ll get to that in a second.
You may not be doing so badly if you’re in the high 500’s. Here, your score still starts with a five, but it’s going somewhere. You should be encouraged that you can work from this place easily back into decent standing. It may take some time, but you can do it.
Other people are in the 600’s and think that that is terrible. Well, if you’ve read the two examples above you’ll see that 600 isn’t that bad. It isn’t great, and it won’t you a Ferrari, but it won’t leave you hanging either. So, it’s all about perspective.
What To Do
Well, before you even think of rebuilding your credit with credit cards, it might be a good idea to know what’s going on with your credit. You are entitled to a free credit report every year, and you need to get it, like, now. Don’t ignore the commercials and offers. Get the free one for each bureau (Experian, Equifax, and TransUnion) to see what it says.
Most things will come off your credit report after seven years. Yep, they just fall off. It’s the most miraculous thing. That friend I mentioned, they waited out a ton of things on their credit report and their score shot into the upper 600’s in no time after the items fell off. It should be noted that companies will purchase your debts for pennies on the dollar long after the seven year time frame is up and they’ll try to get you to pay on them. This reactivates the debt, and this is yet another reason to know what’s on your credit report. Don’t get back into debts that aren’t even counted against you anymore.
The next thing to do is decide if there are any debts you can deal with to get them showing up as paid on your report. That, of course, helps a lot. They may be small, but every little bit helps. You may not have time to wait seven years for everything, so you might need to get moving on repaying some old debts.
Keep the free reports, write on them, take notes, and keep a ledger of what you’ve paid, what has fallen off, and get new ones every year. It’s a brilliant idea to manage your credit. We have a free report here that shows you how to clean up your credit reports the right way.
The Cards That Can Help Rebuild Your Credit
Orchard Bank and Capital One both have cards that offer help in rebuilding credit. Now, some of these cards are secured and others are not. You could also go to a bank like First Premier that offers secured and unsecured cards.
Secured and unsecured cards offer the same benefits–building your credit. However, a secured credit card is easier to get because it requires a deposit that protects the issuer. So, you put in, say, a $500 deposit and that is your credit line. Now, that’s pretty smart because you can get your foot in the door and you’ll likely want to keep this card in good standing. You don’t have to use this card forever, but you need to keep it long enough to get a line of credit that is unsecured.
You could progress to an unsecured card with Orchard Bank of Capital One, or you may want to do something different.
What if you get a card from a retailer for something practical? Let’s say you have to some home improvements or remodeling that is pretty important. Well, you’ve got the retailer there offering a card and savings when you open the card. Take it. The credit line will be small, enough to finish the project, and small enough that you can keep it in good standing without much problem. So, you get something you need, you get a credit line that shows up on your credit report, and everybody wins.
After that, you could move on to a bigger name card that offers a bigger credit line, and more options or rewards. That’s where you want to be going. Let’s face it, anyone can see the progression on your credit report, and seeing this progression of credit is a good thing for someone to see when you’re applying for a loan, etc.
The Bottom Line
Patience is the key. You could be starting from rock bottom, but you can rebuild your credit (not just with secured credit cards, but they do help), but you can rebuild your credit with a strategy that puts you in the right places at the times with the resources you can handle at the time. Don’t go too big at first, plan for big things in the end, and you’ll end up with what you want–better credit. Don’t be afraid of secured credit cards, there’s no shame in using them, and they lead you to a better end.
Above all, remember the three principles of great credit:
- Always make your payments on time
- Never charge more than 30% of your total available credit
- Build up to at least three credit cards over time (wait at least six months in between applications).
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