3 Credit Card Tips for People With Bad Credit

Credit Card
3 Credit Card Tips for People With Bad Credit

Your credit score can be essential for a variety of reasons. Home loans, apartment leases, and small business loans can be denied because of poor credit. While they cannot see your actual score, some employers even look at your credit report during the hiring process. Credit can be arduous and time-consuming to build but seemingly easy to damage.

For those who have limited or poor credit, using a credit card is a great way to increase your score. Making a plan for careful usage and sticking to it requires successful management of your budget and spending. Taking out a credit card is not without risk, but the following tips can help you get and maintain the best credit card for your situation. 

1. Research Your Options

Credit cards might seem like a standard item, but they can vary a great deal. Some cards have annual fees, interest rates differ, and certain cards offer rewards such as cash back or air miles. If your credit score is high, most options are likely available to you. If your credit score is low, you can usually at least qualify for a secured credit card.

Secured credit cards are designed to lessen the risk the card issuer assumes by requiring an initial deposit. The deposit, which becomes your credit limit, is held in reserve in case you are unable to make your payments. Your deposit is fully refundable, so you will eventually get it back as long as you do not skip payments.

Even among your choices for secured cards, there are variances. While they usually have much higher interest rates than standard credit cards, some have lower rates and an annual fee. Others have very high rates and no annual fee. So before you make your decision, think about how likely you are to pay off your entire balance each month. 

If you know you will pay your monthly balance in full, a higher interest rate/no annual fee combination will be your best bet. If it is likely you will occasionally carry a balance, a lower interest rate may justify paying an annual fee.

The most important thing is to realistically look at your situation. Run the math on probable scenarios and determine what is best for your individual circumstances. Just choosing the first card you’re approved for might end up hurting you in the long run.

2. Keep Your Balance Small

While maintaining a credit card responsibly can boost your credit score, missing payments can harm it. If your primary goal is to rebuild your credit, keeping your balance small and paying in full every month is ideal. Should you find yourself unable to pay off the full balance, make sure to at least make regular payments. Neglecting to make minimum payments is harmful in two ways. 

First, skipping payments damages your credit and demonstrates that you are a potential risk for lenders. Banks could take the view that since you cannot keep up minimum payments, you are also unlikely to pay a mortgage. 

Second, letting your balance increase month after month can rack up huge interest expenses. The median credit card interest rate in the United States is 19.49%. If your credit is poor, your interest rate is likely to be on the higher end, so interest payments can be substantial.

Potential lenders also take note of how high your credit card balance is on average. If you charge close to the maximum limit on a regular basis, you can be viewed as a risk. Lenders might assume you are likely to spend as much as allowed without regard to whether or not you can afford it. Keeping your balance low tells lenders you are capable of budgeting and in control of your spending habits.

3. Make Adjustments Over Time 

As your credit score or financial situation changes, it’s important to assess whether your credit card is serving its purpose. Have you been consistently paying off your balance but have a hefty annual fee? Switching to one with a higher APR and no annual fee might be advantageous.

Has your income significantly increased since taking out the card? Consider a step up in spending limits to prove you are responsible with larger amounts of credit.

Another factor to assess is whether the perks offered by your card are most beneficial to you. Do you rarely take trips and wish you could keep your balance a little lower each month? If so, cash back rewards are going to be more useful to you than air miles. 

Some cards offer the ability to transfer rewards from one type to another, but some cards only allow one. These points and rewards can add up over time, so make sure what you’re accumulating aligns with your preferences.

Other adjustments could include anticipating major expenses. If you have a major car repair that will need to be paid off over several months, a high-APR card will inflate your balance. One technique to get around this is to find a credit card with an introductory 0% interest rate. You can transfer your entire balance onto the new card and pay off the large expense interest-free. 

This tactic should only be used on rare occasions, however. Applying for credit cards too often or acquiring too many can damage your credit. Be sure you have a set plan for paying off the balance, too. Some people get into the bad habit of frequently opening cards and transferring balances to delay paying up.

Above all, take stock of your credit card spending regularly to ensure you’re not overextended. It’s important to make adjustments when problems first arise rather than letting them get out of control. If you notice your balance is increasing every month, you might request lower spending limits to keep yourself in check. Without taking action, you could find your credit score and overall finances in worse shape than before you took out a card


Credit cards are one of the surest ways to build credit. Knowing what kind is best for you and how it will affect your score can help you develop a long-term credit-building plan. As with most strategies involving financial risk, it is imperative to know the possible pitfalls and avoid them. By adhering to the parameters you set for yourself, a credit card can be the first step toward a better credit score.