Best Credit Cards For Bad Credit Scores 2016

Do you know what your credit score is? If your credit score falls in the range of 560-650, then your credit score would be considered to be "bad." But how bad is that really?

While no one wants to have anything in their lives to fall into the "bad" category, if your credit score is currently there, you're not alone. Roughly 1 in 5 Americans have a credit score that falls into the "bad" range, according to a report done in 2015 by the Fair Isaac Corporation (the creators of the FICO credit score).

So what does this mean for you? A bad credit score could cost you opportunities in the form of new credit. It could also cause you to pay higher interest rates for the credit you are approved for.

Fortunately, a bad credit score isn't a lost cause. There are credit cards designed for this credit range that can help you improve your score. All it takes is six months to one year of positive credit behavior to see an improvement.

So what's the best credit card to help you improve a bad credit score? We've combed through all the options out there to help you find the best card for you.

1. The Best Secured Credit Card to Improve Credit

Wells Fargo Secured Visa Offers a High Credit Limit

When you're just getting started improving your credit, a secured card is a great card to try since they're easier to be approved for. The Wells Fargo Secured Visa Card is one of the best secured cards out there.

Wells Fargo even reviews your account periodically to see if you're ready to be upgraded from your secured card to a traditional credit card.

Secured cards are never meant to be forever. They're stepping stones to help you work your credit score up to a traditional credit card. What makes the Wells Fargo secured card so great is that they don't wait a specific amount of time to see if you're ready to graduate. Rather, they regular review your account to see if you might be ready. This is a great feature for someone who wants to move up to traditional credit cards as soon as possible.

To qualify, you have to pay a $25 annual fee and put down a security deposit between $300-$10,000. This $10,000 limit is notably higher than most secured credit cards. In fact, this limit sets Wells Fargo ahead of the pack for those looking to quickly improve their scores.

How Secured Credit Cards Work

Secured credit cards are designed to help people improve their credit. Generally, they look and work like typical credit cards.You can use them at any retailer that accepts your issuer.

The defining trait of secured credit cards is that they require you to pay a security deposit to be approved. The good news is that this makes it a lot easier for you to be approved. The bad news is that, generally, your credit limit will match your deposit. That's why these cards are good for credit building. (And why they're bad for large purchases or emergencies.)

With secured cards, your credit limit will always be the same as your security deposit. (Only the Capital One Secured Mastercard allows you to have a limit higher than your deposit). If you want a higher card limit, you’ll have to increase your security deposit (up to the card’s allowed maximum). The security deposit cannot be withdrawn or used to pay the monthly bill. The only time you'll get your security deposit back is when you close your card. (This could also apply if you transfer to a traditional credit card offered by the same issuer).

The Positive Effect Secured Cards Have on Your Credit Score

Secured credit cards are great for your credit score. They're easy to get and they enable you to show positive payment behavior to future lenders. In fact, if you keep using your card and pay it off every month (on time), you'll see your credit score improve. It doesn't even take that long to start improving either. Keep at it for 12 months and your score will go up.

FICO credit score factor Percentage weight on credit score: What it means:
Payment history 35% Your track record when it comes to making (at least) the minimum payment by the due date.
Amounts owed 30% How much of your borrowing potential is actually being used. Determined by dividing total debt by total credit limits.
Length of credit history 15% The average age of your active credit lines. Longer histories tend to show responsibility with credit.
Credit mix 10% The different types of active credit lines that you handle (e.g., mortgage, credit cards, students loans, etc.)
New credit 10% The new lines of credit that you've requested. New credit applications tend to hurt you score temporarily.

As soon as you see your credit score moving from bad to fair, start looking for the best credit cards for fair credit ranges. If you're not in a hurry, you could also wait. As your score goes from bad to fair to good, you can qualify for rewards cards. Once that happens, start looking for the best cards for good credit scores.

2. The Best Money Back Secured Credit Card for Everyday Spending

Discover it® Secured Offers Cash Back on Gas and Dining

We've talked a lot about improving credit so far - and for good reason. Raising your credit score is a simple way to open up a great deal of financial opportunity in the future. But what about being able to track your improvements as you go?

If you love to see your progress, then the Discover it® Secured Credit Card is the best choice for you. It comes with free access to your FICO score, updated monthly. That means you can actually watch your score improve as you use your card over time.

Even better, this card gives you a chance to earn rewards for your spending too. With Discover it® Secured, you get 2% cash back for purchases made at restaurants and gas stations (for up to $1,000 spent per quarter). You then get 1% cash back on everything else. Plus, you don't have to pay an annual fee to get the card. You also don't pay foreign transaction fees, penalty APRs for late payments, or a fee on your first late payment. In other words, you earn rewards without losing earnings to excessive fees. The security deposit for this card can range from $200-$2,500.

Free FICO Credit Scores to Track Your Progress

While you can track your credit score with the help of Discover, that's not the only way to see how you're doing. It's also easy (and important) to check your credit report every year.

Everyone has free annual access to their credit report via annualcreditreport.com. Since there are three credit bureaus that generate your report, you can check one of them every few months. That enables you to check your credit report for free three times per year. It's important to note that your credit report won't show your score, but it does give you a chance to make sure your report is accurate. (The data on your report will impact your score.) This will help you catch fraud or reporting mistakes fast. And the sooner you catch those, the less likely have a negative effect on your score.

Earn Cash Back Even with Bad Credit

Cash back credit cards are usually only available to those with good or excellent credit scores. However, as credit options for those trying to rebuild their credit grow, so too are rewards options.

With a cashback credit card, you accumulate rewards for your spending in the form of cash. There's usually a certain percentage that you get back once you meet a required spending amount. How you can redeem your cash back will vary based on the card issuer, but usually it's in the form of a check, direct deposit, or a statement credit. (A statement credit is basically a reduction in your credit card balance.)

Interestingly, there's a slight loophole in how cash back credit cards work. For bonus cash back rates, the bonus cash back is awarded based on purchase location, not the items purchased. Therefore, if you’d earn a high cash back rate at gas stations, all items bought at a gas station will be eligible for that rate.

On the flip side, another thing to keep in mind is that the benefits of a cash back credit card become nullified if you carry a balance on your card. If you're in a situation in which you pay more in interest than you earn in rewards, then you could get stuck in a dangerous debt loop. These cards (and all credit cards) are best used if you pay the balance off every month.

Runner-up Credit Cards for Everyday Shopping for Bad Credit

There are a ton of credit cards out there that provide rewards for everyday spending, even if you have bad credit. Check out a few great options below.

3. The Best No Annual Fee Credit Card

Capital One Platinum MasterCard Doesn't Have an Annual Fee

The Capital One Platinum MasterCard is a no-annual-fee credit card that was created for people with bad credit. After five months of on-time payments, Capital One will offer you access to a higher credit line. This plays a major a role in boosting your credit score. Additionally, Capital One has a free credit tracking tool to help you monitor your credit progress.

It tends to be more expensive for someone with a bad credit score to obtain a credit card. The reason for this is because they appear to lenders as though they've exhibited riskier financial behavior. Commonly, credit cards for people with bad credit usually come with an annual fee of around $30. Not so with this card, though, the Capital One Platinum MasterCard has no annual fee.

How Your Credit Score is Determined

The exact formula used for calculating your FICO credit score is undisclosed to the public so that consumers cannot game the system. However, FICO does share the criteria that determine your credit score. There are five factors that affect your FICO credit score and each one may hold a different weight:

Credit Score Range Credit Quality Effect on Ability to Obtain Loans
300-559 Very Bad Extremely difficult to obtain traditional loans and line of credit. Advised to use secured credit cards and loans to help rebuild credit.
560-649 Bad May be able to qualify for some loans and lines of credit, but the interest rates are likely to be high.
650-699 Average/Fair Eligible for many traditional loans, but the interest rates and terms may not be the best.
700-749 Good Valuable benefits come in the form of loans and lines of credit with comprehensive perks and low interest rates.
750-850 Excellent Qualify easily for most loans and lines of credit with low interest rates and favorable terms.

Making all of your payments on time plays a huge role in your credit score. The second-biggest criteria is how much you owe in relation to how much credit is available to you. Essentially, your credit score will be higher if you use less of your available credit. To achieve this, you can either pay down your debt or increase your credit limits.

Raise Credit Limits to Boost Credit Scores

Many credit card issuers allow you to request credit limit increases online or over the phone. Others will automatically increase your credit limit over time. Generally speaking, credit card issuers don't offer these increases in the first six months of opening the account.

When you ask for a credit line increase, you'll likely have to go through a credit check. Since this could lead to a temporary ding in your score, wait until you know you have a chance at approval. (In other words, if your score is on the rise, you have a better chance of getting the increase.)

Runner-up No Annual Fee Credit Cards

Want to see even more options for credit cards that don't charge an annual fee? You're in luck. Read on below for another no annual fee credit card that can help you increase your score from bad to good.

A Bad Credit Score Doesn't Have to Be the End of Your Financial Growth

It's never fun to see that your credit score is less than perfect. The good news is, no credit score (good or bad) is forever. No matter what your score is, it takes consistency to grow it to good standing. (Or maintain it if it's already in good standing.)

That means you have the power to change your credit score. It won't happen overnight, but if you maintain a few financial best practices, you'll see improvements in as little as 6-12 months. What should you start with?

Obtain some form of credit. If you can't get a traditional credit card, a secured card will work too. Then, use that card to make small purchases each month and pay it off in full before the billing cycle ends. Keep doing that every month for six months to one year and you'll see a drastic improvement in your score.

Some people may want to tell you that improving your credit score is more complicated than this. I'm here to tell you that it's not. There are no shortcuts to a better score. And you don't have to redo your entire financial picture to improve your score. You simply need to show lenders that you can use credit responsibly.

Be on time. Be consistent. Pay off the balance on your new card every month. This is the magic formula to a better credit score. And it will absolutely help you get to where you want to go for future lending needs.

Credit Card Notable Feature Who It's Best For
Wells Fargo Secured Offers the potential of a very high credit limit for a secured card. People with bad credit who have the funds for a large security deposit.
Discover it® Secured Secured credit card that can help rebuild credit with no annual fee. People with bad credit who want to repair their credit profile while also earning cash back on spending.
Discover it® Secured Secured credit card that can help rebuild credit with no annual fee. People with bad credit who want to repair their credit profile while also earning cash back on spending.
Capital One Secured Mastercard A secured credit card with an extremely low initial deposit requirement to help rebuild credit immediately. People who have poor credit and don't have a lot of cash for a big security deposit.
Credit One Bank® Platinum Visa Rebuild credit without a security deposit. People with bad credit who cannot afford a security deposit for a secured credit card.
Capital One Platinum Designed for people without good credit to help rebuild credit with no annual fee. People with bad/average credit who want a credit card to improve their credit without a security deposit.
American Express Bluebird Free prepaid account that offers check-writing. People who want a low-cost alternative to a traditional checking account.

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MyBankTracker
Wednesday, 06 Jul 2016 4:21 PM
<p>These credit cards are secured credit cards, which means that you put down cash as a security deposit. This amount of cash will determine your card limit. If you put down $500, your card's credit limit is $500.</p><p>Most of these secured credit cards allow you to put down a minimum of $200-$300 and a maximum of $3,000 to $5,000.</p><p>If you're buying a used car for $2,000, it wouldn't be wise to open a secured credit card. You'll need the cash upfront as a security deposit, which would probably be better used to pay for the car in cash.</p>
Tuesday, 05 Jul 2016 7:10 PM
<p>What is the average credit card limit for these credit cards? I'm trying to buy a used car for $2000 and would like to use a credit card.</p>
MyBankTracker
Tuesday, 19 Apr 2016 9:32 PM
<p>If you have bad credit and don't want to put down a security deposit, the Capital One Platinum card is a solid choice. It isn't a secured credit card, but it is designed for people with bad credit and want to try to improve their credit.</p>
Tuesday, 19 Apr 2016 7:49 PM
<p>Hi I;m looking for credit cards for bad credit with no deposit, help please!</p>
MyBankTracker
Sunday, 17 Apr 2016 2:56 PM
<p>Lucas, you have many options for a secured credit card. Do you expect to be able to increase your security deposits over time? If so, the Wells Fargo Secured Visa is a good choice.</p><p>Or do you just want something you can use responsibly here and there to help rebuild credit? The Capital One Secured MasterCard is good for get started right away.</p>
Sunday, 17 Apr 2016 1:22 PM
<p>Hi, I have a very poor credit score of about 560 what credit card can you recommend? Thank you!</p>