How to Get a Credit Card Even With Bad Credit

It finally happened. You took the plunge and applied for a credit card. Now you've got a letter in your mailbox from the card issuer telling you that your application was -- denied?! Apparently your credit score wasn't quite up to their standards. But don't despair. There are ways to get a credit card, even if you have bad credit.

First, go to My FICO and order a copy of your credit score. You need to know what your number is before you proceed. If you've already got a good idea of what you're working with, it's time to start looking for credit cards designed for card holders with poor credit.

Unsecured Credit Cards vs. Secured Credit Cards

Unsecured credit cards are available to most borrowers with decent credit scores. These cards are issued based on financial risk. If the card issuer believes that they can trust an applicant to make timely payments and stay within their credit limit, they will approve the applicant for an unsecured credit card.

Secured credit cards are designed primarily for people who need to build or rebuild their credit. These are credit cards linked to a bank account. If the card holder misses a payment, the money they owe is then deducted from the bank account. This decreases the risk that the card issuer takes, and makes secured cards easy to obtain regardless of credit score.

How to Choose a Secured Card

Like unsecured cards, secured credit cards have varying terms and limits. When you choose a secured credit card, look for the following features:

• Generous credit limit. Some cards offer limits up to $10,000.
• Reports to all major credit bureaus. This ensures that your timely payments will be reflected in your credit report.
• No activation fees. Some secured cards want $150 or more just to open an account. Steer clear of these offers whenever possible. If a card requires a weekly fee for use, run far and run fast!
• Reasonable interest rate. If your credit rating is poor, you can expect to pay higher than normal interest rates. Currently, 19.9% APR is common for secured credit cards.

Secured credit cards aren't the same as pre-paid credit cards, though they two are similar in some respects. A pre-paid credit card is like a debit card; you load it with a certain amount of money, and you can spend up to the amount you paid in. Once the funds are depleted, you can't charge anything else until you reload the card.

Secured credit cards also require an initial deposit, which becomes your credit limit. With a decent limit ($1,000 or more), these cards will reflect positively on your credit score. Just be sure not to max them out! Try to keep your total debt at or below 25% of your available credit. Lenders will look favorably on that debt-to-credit ratio.

Guaranteed Credit Cards

Some card issuers advertise guaranteed credit cards, available to anyone regardless of their credit rating or lack thereof. While it's possible for any adult to obtain one of these cards, the fees and high interest rates make them a last resort for many. If your credit score is low, you're better off going online to find a secured card from a reputable company.

Click here for a list of credit cards for those with bad credit.