Your credit score is a general measurement of your financial responsibility. Credit ranges from 300 to 850, anything below 630 is considered poor credit. Many different factors go into determining what your credit score is. These factors include late or timely payments, bankruptcy, charge-offs, and applying for a new card, among other factors.
The credit score was designed to determine how much of a risk someone is or is not. A poor score results in limited options, but there are still ways to acquire credit and build your score no matter where it currently stands. Bad credit affects your utilities, cell phone, car insurance rates, and in some cases determines where you live.
If you’re presently dealing with poor credit and you want to sign up for a card to rebuild it consider these important factors when making your decision. You want to pick a card that reports to all three major credit bureaus so that you can get your timely payments reported to improve your score. You also want to choose a card with the lowest credit card rates and the ability to upgrade later once you have proven your responsibility.
Credit card APR explained
Credit card rates or APR explains how your interest is calculated every month. If you’re not able to pay off your statement balance in full, you’ll be charged interest. You can find out how much you’re paying monthly in interest by taking the interest rate and dividing it by 12. For example, a 23.99% interest rate is 1.99% interest per month. Multiply your balance by 1.99%, and that’s how much interest you’ll be charged that month.
If you’re charged interest on your average daily balance, it matters which day you add charges to your card. For example, if you continuously use your card for purchases throughout the month, gradually increasing the balance until the end of the month, you pay interest on a higher average. Alternatively, if you paid your charges off right afterward, your average daily balance would be lower, and you would, therefore, pay a lesser amount of interest.
How to Get a Card with a Credit Score of 500
Signing up for a card with manageable credit card rates while having bad credit is possible. The card may not include a bonus, but that’s okay because you won’t be depending on this card forever. Secured cards are an excellent option to rebuild credit with because the issuer is protected in the event you don’t pay your bill. For this reason, secured cards are more accessible to obtain than unsecured cards. However, there are still unsecured cards available for poor credit, and some are listed below. To qualify for a secured card, you’ll need to prove your source of income. A bankruptcy may cause your application to be denied.
Regarding unsecured cards, the credit card rates are higher since the issuer doesn’t have the same protection. The credit limit on unsecured store cards is usually quite low. The advantage is that during the application process, you don’t have to put down a security deposit to obtain a line of credit.
The Average Interest Rate for an Unsecured Card
The average interest rate for an unsecured card is between 23.9%-29.99%. What is the average interest rate for an unsecured credit card? In some cases, the interest rate is as high as 36%.
These are the top 10 credit cards for poor to fair credit
1. Indigo MasterCard
The unsecured Indigo MasterCard helps you rebuild credit but at a high-interest rate. Fortunately, you can begin the application for this card with a soft inquiry that won’t impact you like a hard inquiry. The annual fee for this card can be anywhere from $0-$99, which is a big range. The APR on the Indigo Mastercard is 23.9%. With this card, it is okay if used previously been in bankruptcy; you can still sign up and start the application without impacting your credit score. When I want to know is if it’s secured or not Indigo Platinum MasterCard.
2. OpenSky Secured Visa Credit Card
This card is specifically for those looking to rebuild their credit. It’s also for those who do not have a traditional banking service. What is significant about the OpenSky Secured Visa credit card is that it does not require a credit check during the application. You don’t need to have a regular bank account for this card. The OpenSky card does charge a yearly fee, but there is no charge to convert to an unsecured card. The refundable secured deposit starts at $200.The ongoing APR is 19.64%.
3. Credit One Bank Card with Cash Back Reward
This unsecured card allows you to receive 1% cash back reward and it has no annual fee. Cash Back A bonus is automatically added to your account every month. The credit card rates are variable between 20.24% to 26.24%. This may be the best rate, considering that you have poor credit. Fair credit is needed to acquire this unsecured card. The annual fee ranges from $0 to $99. This is a card that can grow with you. As your credit improves, you can request a higher credit limit. Initially, your credit limit will be between $300 + $500.
4. Discover it Secured Card
The Discover it Secured Card has the best rate in comparison to similar offerings. With an introductory APR of 10.99%, certainly one of the best rate offerings listed here. The card requires a traditional bank account to make the initial deposit. There is no annual fee and cardholders will be happy to know they’ll receive 2% cash back on gas and restaurants. This bonus applies to every quarter and is valid up to $1,000. Cardholders also earn 1% cash back on all other purchases. After eight months of responsible account handling, you may be able to sign up for the secured version of this card. All the cash back you earn during your first year will be automatically matched by Discover, an excellent perk.
5. Total VISA Credit Card
If you have a bankruptcy on your credit report, you can sign up for this card. The card helps you rebuild creditworthiness which leads to a better rate and rewards. You’ll get a response within seconds after you apply. If you’re approved, you’ll be able to access your credit after paying a processing fee. One benefit of this card is that your account is reviewed regularly to determine if your credit line can be upgraded. There is no security deposit, but there is an $89 processing fee. The credit limit is capped at $300, and the APR on this card is higher than most at 29.99%. There is no reward program or bonus available.
6. Milestone MasterCard
The Milestone MasterCard has an annual fee between $35 and $99. The APR is 23.99%, and the card can be acquired with less than perfect credit. This is not the best rate, but it’s not the worst either. When you apply for this card doesn’t affect your credit score. The Milestone MasterCard is unsecured requiring no security deposit. The credit line starts at $300 and Milestone reviews your credit profile to determine what your limit will be once approved.
7. NASCAR Credit Card from Credit One Bank
This card offers the opportunity to increase your credit line and gives you 1% cash back on cash and automotive purchases. Those who successfully apply get the reward of earning double cash back at NASCAR.com. Your bonus is provided to you on a monthly basis in the form of a statement credit. There is a fee for requesting an increase in your credit line ranging from $9 to $19. Those with bad credit will pay an annual fee of $75 the first year that increases to $99 in the second year. This card is unsecured and as a result, has higher costs. The NASCAR credit card rates are a variable fee that ranges from 20.24% to 26.24%.
8. First PREMIER Bank MasterCard Credit Card
Once approved, this unsecured card charges a processing fee of $25-$95.The first year fee ranges from $75 to $125 contingent on the starting amount of your credit line. The credit card rates on this card are one of the highest interest rates on the market at 36%. You might ask yourself why to bother to sign up this card with all of the excessive fees. This card is for a specific person that needs up to $896 in spending power in an emergency. The ability to gain $896 in unsecured funds could be viewed as a reward itself.
9. First Progress Platinum Select Mastercard
This secured card has credit card rates of 14.74% and an annual fee of $39. On the upside, there are no monthly fees and no minimum credit score requirement. You can receive your deposit back by paying off your balance at any time. The First Progress Platinum Select MasterCard is an excellent choice for someone who has not established a credit history yet or who has a poor credit score. With responsible use, First Progress will approve an increase to your credit limits. As you demonstrate responsibility in your account, you may be able to get the best rate First Progress offers.
10. Capital One QuicksilverOne Cash Rewards credit card
This card includes a $39 annual fee but allows you to earn 1.5% cash back on every purchase you make you have Fair Credit. After making five payments on time, you get your credit line raised. Once you’ve made five monthly payments on time, you can access a higher credit limit. This card has perks but not the best rate, APR is 26.96% for the Quicksilver One card.
Avoid paying APRs or credit card rates by paying your credit card bill in full. This will keep your daily average balance low which determines how much interest you’ll pay. You can avoid paying interest entirely by paying in full soon after your transaction. If you have recent delinquencies, this can affect the approval of your account.
To build your credit effectively, you want to make sure that you’re utilization ratio is appropriate. Using the card too much would be spending the full amount of your card limit. If your limit is at $500, spending all $500 would be overuse of the card. You want to have a utilization ratio of around 30%. If you have a $500 limit on your card, a 30% utilization ratio would be $150. So, while using the card, you don’t want your balance to exceed $150, or you’re using the card to match.
Make On-Time Payments to Earn Credit
Pay your credit card bills on time to avoid being charged credit card rates-timely payments ultimately lead to the best rate. It cannot be stated enough that you should pay your bills on or before their due date and in the full amount. By not paying the total amount shortly after you make charges you increase the average daily balance of your card. The average daily balance is what determines how much interest you’ll be charged. Keep your balance as low as possible to avoid excessive fees.
Some cards offer refundable deposits. The deposit is returned to you when the issuer ascertains your account can be switched traditional one without a deposit. While some individuals are highly educated about Finance others may not know how credit works and don’t know what to do to improve the score. Spend adequate time researching before you apply for a new credit card. Only apply if the cost or something you can afford and the benefits cater to you.
If you want the best rate possible, go with a secured card. Say you need money now and you don’t mind high credit card rates until you can get the best rate, go for an unsecured card. If your credit is, in fact, poor, you should be dedicated to finding a card that rebuilds credit and paying your monthly balance on time. When determining which card has the best rate, be sure to calculate any processing and annual fees.