We’ve put together a list of our 5 favorite unsecured credit cards for low credit scores that offer a high initial credit limit and a fast and easy application process.
When your credit profile is lacking – as in your credit score is below 670 – finding an unsecured credit card with a high initial credit limit can be tough. A lot of times the only credit cards you’re offered are secured cards that require a security deposit.
Luckily, it’s not impossible to find an unsecured card. A lot of credit issuers understand that mistakes happen and everyone needs a second chance now and again. That’s why multiple card issuers specialize in credit cards for people with bad credit making it easier than ever to access credit even if you have a low score.
Why get an unsecured card?
Getting an unsecured credit card offers several advantages, especially for individuals looking to build or improve their credit score. Unlike secured cards, which require a cash deposit as collateral, unsecured cards do not require an upfront deposit, making them more accessible for many people.
Unsecured credit cards often come with better rewards programs, such as:
- cash back,
- travel points,
- or other perks, which can add value to your everyday spending.
They also typically offer higher credit limits compared to secured cards, allowing for more flexibility in managing expenses and maintaining a low credit utilization ratio, which positively impacts your credit score.
Additionally, using an unsecured credit card responsibly can help you build a strong credit history. By paying your bills on time and keeping your balances low, you demonstrate to lenders that you are a reliable borrower, which can lead to higher credit limits and better interest rates over time.
Overall, an unsecured credit card is a practical choice for those who qualify, offering a combination of convenience, rewards, and the potential to build a solid credit profile without the need for an initial cash deposit.
What is a secured credit card?
A secured credit card is a type of credit card that requires a cash deposit as collateral. The deposit acts as security for the lender in case you fail to make payments.
The deposit typically equals the credit limit on the card.
For example, if you put down a $500 deposit, your credit limit will generally be $500.
Secured credit cards are designed for individuals with limited or poor credit history who may not qualify for traditional unsecured credit cards. By using a secured card responsibly—making timely payments and keeping balances low—you can build or rebuild your credit. The issuer reports your payment history to the major credit bureaus, helping to improve your credit score over time.
One of the main benefits of a secured credit card is that it provides an opportunity to establish a positive credit history while minimizing the risk for the lender. Additionally, many secured credit cards offer the possibility of transitioning to an unsecured card after demonstrating responsible use and improving your credit score. This makes secured credit cards a valuable tool for anyone looking to establish or rebuild their credit.
How credit cards can help you build credit
Credit cards can be an effective tool for building credit if used responsibly. When you make purchases with a credit card and pay off the balance on time each month, it demonstrates to lenders that you can manage credit responsibly. This positive payment history is a significant factor in your credit score.
Additionally, maintaining a low credit utilization ratio – the percentage of your credit limit that you use – can further boost your credit score.
Ideally, you should aim to use less than 30% of your available credit.
Having a mix of credit types, such as:
- credit cards,
- loans,
- and mortgages, … also positively impacts your credit score.
Credit cards can be part of this mix, showing lenders that you can handle different types of credit. Over time, as your credit history lengthens and you continue to manage your credit well, your credit score will improve. It’s crucial to avoid late payments and high balances to prevent damaging your credit score.
By following these practices, credit cards can help establish and enhance your credit profile, making it easier to secure loans and better interest rates in the future.
How to Improve Your Credit Score
Improving your credit score is a crucial step toward achieving financial stability and accessing better credit opportunities. Here are some effective strategies to help boost your credit score:
1. Pay Your Bills on Time: Payment history is the most significant factor in your credit score, accounting for 35% of the total. Consistently paying your bills on time, including credit card payments, loans, utilities, and rent, will have a positive impact on your score. Set up automatic payments or reminders to ensure you never miss a due date.
2. Reduce Credit Card Balances: High credit card balances can negatively affect your credit utilization ratio, which is the second most important factor in your credit score. Aim to keep your credit utilization below 30% of your total available credit. Paying down existing balances and avoiding new debt will help lower this ratio and improve your score.
3. Avoid Opening New Credit Accounts Frequently: Each time you apply for new credit, a hard inquiry is made on your credit report, which can temporarily lower your score. Multiple inquiries within a short period can signal to lenders that you are a higher risk. Instead, focus on managing your existing credit responsibly before seeking new credit.
4. Dispute Errors on Your Credit Report: Regularly review your credit reports from the three major credit bureaus (Equifax, Experian, and TransUnion) for errors. Mistakes such as incorrect account information or fraudulent activity can harm your credit score. If you find any discrepancies, dispute them immediately to have them corrected.
5. Keep Old Accounts Open: The length of your credit history influences your credit score. Closing old accounts can shorten your credit history and reduce your available credit, both of which can lower your score. Instead, keep old accounts open and occasionally use them to maintain a positive credit history.
New
6. Use a Mix of Credit Types: Having a diverse credit portfolio, including credit cards, installment loans, and retail accounts, can positively impact your score. This mix demonstrates your ability to manage different types of credit responsibly.
7. Become an Authorized User: If a family member or friend with good credit adds you as an authorized user on their credit card, their positive payment history can reflect on your credit report, potentially boosting your score.
8. Consider a Secured Credit Card or Credit Builder Loan: If you have bad credit or no credit history, secured credit cards and credit builder loans are effective tools to establish or rebuild your credit. These products require a security deposit or savings account, but they report to credit bureaus and can help improve your score with responsible use.
Improving your credit score takes time and consistent effort. By following these strategies, you can steadily raise your score, providing you with greater financial opportunities and a stronger foundation for your financial future.
What can you do if you don’t qualify for a credit card?
If you don’t qualify for a traditional credit card, there are several alternative steps you can take to build your credit.
Apply for a secured credit card
One option is to apply for a secured credit card, which requires a cash deposit as collateral. This type of card is easier to obtain and can help you build a positive credit history when used responsibly.
Become an authorized user
Another option is to become an authorized user on a family member’s or friend’s credit card. This allows you to benefit from their positive credit history, provided they use the card responsibly. However, make sure the primary cardholder makes timely payments and keeps their balance low, as their activity will impact your credit.
Take out a credit builder loan
You can also consider applying for a credit-builder loan from a bank or credit union. With this type of loan, the borrowed amount is held in a savings account while you make payments, which are reported to credit bureaus. Once the loan is paid off, you receive the funds, and your credit score benefits from the positive payment history.
Report all on time payments
Lastly, paying your existing bills on time, such as rent, utilities, and subscriptions can help your credit. For these bills to help your score will have to get them reported. Find a company that reports payments – ideally to all three major credit bureaus – and watch as your score improves
How can you improve your chances of getting approved for a credit card?
Improving your chances of getting approved for a credit card means being strategic about which cards you apply for.
Check your credit report
Firstly, check your credit report for any errors and dispute inaccuracies, as they can negatively impact your credit score. Make sure your credit score is as high as possible by paying off outstanding debts and maintaining a low credit utilization ratio.
Only apply for cards that match your credit profile. If you have limited or poor credit, consider secured cards or cards designed for building credit. Demonstrating steady income is also crucial, as issuers want to see that you have the means to pay off your balance.
Prequalify before you apply
It’s also beneficial to limit the number of recent credit inquiries, as too many applications in a short period can be seen as a red flag. One way to do this is to prequalify.
Prequalifying is when you submit an informal application with your basic financial information and the issuer does a soft credit check. A soft credit check will not hurt your score. The issuer is simplying looking to see if you meet the basic criteria.
Being prequalified means that you meet the basic criteria but it does not guarantee approval. That said, it’s a useful tool. Prequalify and then apply for the best card you prequalified for to up your chances of being approved.
What should you do if your credit card application is denied?
If your credit card application is denied, it’s important to figure out why and take steps to correct the issues. First, review the denial letter you receive from the issuer. This letter will outline the reasons for the denial, providing insights into areas that need improvement.
Next, obtain a free copy of your credit report from the major credit bureaus—Equifax, Experian, and TransUnion. Review these reports for any errors or negative marks that might have contributed to the denial. Dispute any inaccuracies you find to ensure your credit report is accurate.
Focus on improving your credit score by paying all your bills on time, reducing your outstanding debt, and maintaining a low credit utilization ratio. Building a positive payment history is crucial for improving your credit profile.
Lastly, avoid applying for multiple credit cards in a short period, as this can negatively impact your credit score. Give yourself time to improve your credit before reapplying. Most experts recommend waiting at least six months between applications. Otherwise you may look desperate for credit and receive more denials.
By taking these steps, you can enhance your creditworthiness and increase your chances of approval in the future.
Final Thoughts
No matter if you have a good credit score or fall into the poor category, you should be able to access the credit you need. These seven unsecured credit cards could be your answer. They are designed to help you build your credit with responsible card usage and prove to lenders that you are a trustworthy borrower.
Who knows, you may even be rewarded for your good credit behavior. Most importantly, they offer some of the highest initial credit limits on the market going all the way up to $1,000 without a security deposit! So go ahead and see if one is right for you.
