Ask our Experts
How do I know if I have bad credit?
There are both qualitative and quantitative criteria that may help you determine if you have bad credit. From a quantitative perspective, a FICO score in the 300-619 range is considered “bad.” If you do not know your credit score and want an interactive way in which to approximate it, try our Free Credit Check
. Alternatively, if any of these are applicable, you have bad credit:
- You are late on a credit card, loan or medical bill or payment
- The balances on your credit cards are near your limits
- You have declared bankruptcy in the last three years
- You have been more than 60 days late on a medical bill, credit card or loan payment in the last nine months.
It is important to note that mistakes on your credit history can misrepresent you as having bad credit. Since you are legally entitled to free copies of your credit reports from the three major credit reporting agencies—Equifax, TransUnion and Experian—every 12 months, you should make sure to check them for mistakes yearly. To do so, visit AnnualCreditReport.com
, and report any discrepancies. It is important to check the report from each agency thoroughly and file any necessary credit report disputes
because inaccuracies can significantly damage your credit score and the information from each source may differ (all three reports can be accessed at annualcreditreport.com).
How do I improve bad credit?
Simply put, get a credit card for bad credit and use it responsibly. In order to improve bad credit, you must begin infusing positive information into your credit report that will negate past negatives such as bankruptcies, defaults and late payments, and a credit card for bad credit is the easiest tool for developing a pattern of positive credit usage. It represents the easiest option because people with bad credit have better chances of getting approved for a credit card than any other type of loan or line of credit. As a matter of fact, secured credit cards (the most widely used type of bad credit credit card) offer guaranteed approval, which means you can benefit no matter how bad your credit may be.
No matter what type of bad credit credit card you wind up getting, it will report information about your use to the major credit bureaus every month. As long this information reflects on-time payments and low credit utilization
, your credit score will benefit. Additionally, it is important to note that you don’t need to make purchases with a credit card in order to benefit. Simply maintaining a credit card at zero balance and in good standing adds positive information to your three major credit reports each month.
How to get a credit card with bad credit
A lot of people with bad credit routinely apply for credit cards and get rejected, causing them to wonder if a credit card is even attainable with bad credit. If this describes your situation, simply go for a secured credit card. All you must do to get such a card is provide a valid Social Security Number, declare that you have enough income to afford the monthly minimum payment (usually 3% of your balance) and most importantly be prepared to put down a refundable deposit of at least $200. In the very rare event that you get declined for a secured card, try applying for one from a different bank until you get approved. While we typically discourage multiple credit card applications in a short time frame because of the damage they can do to your credit, when you have bad credit, the benefit of getting a credit card ASAP outweighs any such damage. Besides, when you’re applying for secured cards, it’s only a matter of time before you find a bank that will approve you.
What are the different types of credit cards available to people with bad credit?
It’s possible to get three different types of credit cards with bad credit: secured credit cards
, partially secured credit cards and unsecured credit cards for bad credit
. Secured credit cards require a refundable security deposit that doubles as your credit line and protects the issuer from the threat of default, thereby making it unnecessary for the issuer to charge high fees. As a result, secured credit cards are typically a low-cost means of building credit.
Partially secured credit cards require a security deposit as well, but the credit line you receive exceeds the amount of this deposit. Therefore, spending beyond your means is a greater risk than with a fully secured credit card, and you might have to pay higher monthly or annual fees.
Unsecured credit cards are what most people think of as “regular” credit cards. While they do not require a security deposit, they tend to have low credit lines and very high fees. They also require greater discipline from users when it comes to spending since there is no security deposit to act as a safety net. What’s more, these cards are not always available, depending on the policies of the various credit card companies that cater to consumers with bad credit history.
How long will it take for my bad credit score to improve?
Everyone’s credit situation is different. Some people have bad credit because of serious issues like bankruptcy and foreclosure, while others may have had problems making minimum payments. In general, however, you should see improvement in your credit score in roughly 18 months as long as no new negative information is added to your credit reports and you are maintaining 1-2 credit cards in good standing monthly. It is possible to expedite this process somewhat by opening a secured credit card and aggressively adding to your deposit over time. The more credit you have available, the greater credit score improvement you will see.