How to Get Credit Cards with Bad Credit?

Credit cards are one of the most convenient modern financial tools. it makes it easy to purchase your favourite items now and pay for them later. Once considered a luxury, credit cards have now become a necessity. India is a fast-growing market for credit cards with millions of citizens already holding at least one credit card and actively using it. The boost for the digital economy is another contributing factor for the increase in the issue and use of credit cards.

Credit cards are issued by the banks to their customers based on their risk evaluation and after reviewing their credit profile. The credit score is the single most crucial factor that determines your eligibility for a credit card. Besides the eligibility, the credit score also plays a crucial role in determining the credit limit sanctioned on the card.

The credit score reflects the creditworthiness of the applicant and helps the bank in ascertaining whether the applicant is a viable candidate for issuing a credit card. Most banks provide credit cards only to persons with a good or high credit score. That doesn’t mean a person with a poor credit score will not be able to get a credit card. Let’s explore the different ways to get a credit card with bad credit.

Besides credit score, lenders nowadays use other criteria to sanction credit cards. Some of the credit cards are approved instantly even with bad credit history. Let us look at how you can apply for such credit cards and where to find the lender who offers credit cards for bad credit.

What is bad credit?

There are many credit rating or scoring agencies in India which provide the credit score of any person upon subscription or even at free at cost. These credit-rating agencies review the financial history of the person to compute the three-digit numerical score, known as credit score.

A credit score lower than 600 is considered to be a poor or bad credit score. Most lenders prefer providing credit only to applicants that have a good or high credit score of 750+.

When you have a low credit score, it implies that you have a poor credit repayment history in the past or have made wrong credit decisions. This implies that a person with a low credit score is a riskier candidate for any potential loan or credit cards and the risk of default is high.

What are the causes of bad credit?

The credit score, as mentioned above, is the barometer of the sound financial health of a person. This credit score can be hampered by many instances that reduce the credit score and deem the person to be a bad candidate for any loans or credit cards.

Bad credit history or credit score is a result of poor management of your credit. It could be due to any of the following reasons

• Late payments on your loans and credit cards
• Missed payments/defaults on your loans and credit cards
• Foreclosure
• Written-off or settled account
• Too many hard enquiries

Bad credit puts you in the bad book of the creditors and any future loan application is turned down due to the above reasons.

How can I get a credit card with bad credit?

Lenders prefer providing credit cards and loans to applicants with good credit scores. This safeguards them from any potential bad assets. However, there are some options for individuals with bad credit to get a credit card. Some of these options are discussed below.

Apply for a credit card with your primary bank 

Most banks usually offer free credit cards to their customers. The primary bank of the customer has the complete financial history of the customer with the bank and can ascertain the creditworthiness of such customer easily. It is one of the easiest ways to get a credit card despite having a poor credit score.

Get a secured credit card

Credit cards are usually in the form of unsecured credit. This prevents many banks from issuing a credit card to any person with bad credit. However, you can apply for a secured credit card if you have a poor credit score.

A secured credit card is a credit card issued against collateral or on pledging an asset of high value. This assures the issuing authority of the viability of the credit card and prevents it from turning into a bad asset. Usually, secured credit cards are issued with an FD (Fixed Deposit) held at the bank. The credit limit on these cards is usually 80% to 90% of the linked FD value.

Getting a high fee unsecured credit card

Credit card fees are part of every credit card issued by any bank. Most banks lower the credit card fees or waive them off for cardholder with a long-standing relationship with the bank or having a good credit rating. A person with bad credit can apply for a credit card with higher fees. These cards usually do not require the cardholder to provide any deposit and can be issued to persons with bad credit. The cardholder can then use these cards to build a sound credit profile and gradually shift to a credit card with lower charges and better offers.

Cons of Getting a Credit Card with Bad Credit

While it’s possible to get a credit card with bad credit, there are several downsides to it.

• You may be charged higher interest rates and other fees on the card 
• Lower credit limit
• High late fees and other penalties
• Limited choices 
• Limited card benefits 

So, we highly recommend that you take the right measures to improve your credit score so that you’re eligible for better credit cards at the best rates in the future.

FAQs – How to get a credit card with bad credit?