Credit Card For Bad Credit: What Do You Need To Qualify?

Credit Card For Bad Credit: What Do You Need To Qualify?

Individuals with bad credit (credit score of less than 580) have limited options when it comes to credit cards. That’s simply because issuers view them as high-risk customers. That doesn’t mean you can’t get any credit card, though. A few companies are still willing to work with bad credit applicants, but they usually have strict requirements.

Also, they may charge higher fees to compensate for the increased risk they are taking. Therefore, if you manage to get a credit card with a bad credit score, your ultimate goal should be improving your score to qualify for cards that have favorable terms.

That said, here are some of the items you’ll need to when applying for a credit card with your bad credit:

1.Identification Documents

This is a mandatory requirement for all credit cards in the US. It is part of the Patriot Act that requires lenders to know their customers for the purpose of preventing money laundering, terrorism, and other illegal financial activities.

The credit card issuer will ask you to provide details on your name, address, date of birth, taxpayer identification number, and social security. 

Since you are a high-risk applicant, a few lenders may request additional documentation before they can process or approve your application.

2. A Security Deposit

Security deposits are necessary when applying for a secured credit card. The deposit acts as collateral which the card issuer will take should you fail to clear your balance.

The amount of security deposit required usually varies from one issuer to the next. The professionals behind this website show the deposit can range from $200 to $2000. The good thing is this deposit is refundable, so you will get your money back when you close the account. Note that the refund is only applicable if the account is closed in good standing. 

What if I don’t have enough money for the deposit? There are several unsecured credit cards that you may qualify for. However, it’s not advisable to apply for these cards since they usually charge hefty annual fees. The smart thing to do is saving cash until you have enough deposit for a decent secured credit card. This may take some time but it’s a better strategy than rushing for an unsecured card that’ll make you bleed money.

3. Proof Of Income

According to the Credit Card Act of 2009, the US credit card issuers must check the applicant’s ability to pay before providing any credit card. Therefore, this regulation applies to all applicants regardless of their credit scores.

Issuers request proof of income to assess your ability to pay. This process is usually very rigorous in applicants with bad credit. In addition to your annual income, some issuers may also consider a spouse’s income. This can help you secure a higher credit card limit.

Are there any minimum income requirements? The majority of unsecured credit cards have a minimum annual income requirement which can be as high as $12,000 per annum.

Most secured credit cards do not have this prerequisite since they require you to deposit collateral anyway. However, they may consider other factors like your expenses and debt. Some may even go as far as considering your monthly balance after making your mortgage or rent payment.

4. Your Credit History

Expect the issuer to scrutinize your credit history for red flags. The review also checks to determine whether your financial situation is getting better or worse. Credit card issuers may be more lenient if they see your credit history is improving. For instance, you may have had a worse credit score and improved it over time even though your score is still not good. If the graph shows improvements, your chances of approval increase slightly.

On the other hand, factors like liens, bankruptcy, and debts will seriously hurt your chances Are there any card issuers that don’t perform credit checks? Yes, some companies do not conduct credit checks. However, most of these cards are very expensive so they may not be worth it in the long run.

5. A Savings Or Checking Account

A savings or checking account can be used to calculate your financial stability. You’ll also need the account to fund your security deposit if you apply for a secured credit card.

It is possible to get a credit card with your bad credit score, and you might even qualify for several cards. However, don’t let your desperation lead you to expensive cards. Try as much as possible to avoid high annual fees and other charges. You should also use the card to improve your score as fast as possible and switch to a better card.

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