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How to get credit cards with bad credit

Read all you need to know about credit cards and bad credit

09 May 2022Lloyd Smith 5 min read
credit cards, bad credit score, poor credit score

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For most borrowers, their credit score decides what kind of credit card they can get approved for. Since the minimum credit score for a credit card in Australia is usually around 600-622 (depending on the credit reporting body), it can be challenging to get approved for credit cards when you have a poor credit score.

No credit check credit cards can be a great solution in cases like these. Let's take a look at how you can get credit cards for bad credit, and more importantly, how you can deal with bad credit.

Bad credit is used to describe an individual’s poor history of paying bills on time, reflected through a low or poor credit score. It also demonstrates their likelihood of delaying or defaulting on future payments.

A potential borrower with a bad credit score can seem like an unsuitable candidate by a credit provider or lender. Individuals with bad credit can find it difficult to get approved for any new line of credit as they are not considered creditworthy.

Bad credit can even impact their ability to rent properties as landlords tend to run credit history checks to know whether people can pay rent on time or not.

Bad credit credit cards in Australia are meant for the following:

  • Borrowers who don’t have a good credit score. Credit cards for bad credit work as a credit-building tool for such borrowers and allow them to strengthen their credit profile quickly.
  • Borrowers who are yet to start building their credit rating. Thanks to their low entry requirements, they are perfect credit cards for the unemployed in Australia or students who have little or no credit.

With a poor credit score, it is worth examining whether you should get a credit card in the first place.

If you have struggled with making repayments on time in the past, taking on a new credit card will only mean incurring more debt and making it even more difficult for you to manage your finances. Instead of applying for new credit cards, it might make more sense to draw up a budget keeping in mind your monthly earnings and expenditure.

But if you need a credit card to make routine purchases and you are sure you can pay off credit cards bills on time, credit cards for poor credit scores are definitely worth exploring.

You can start by checking your credit score online and then researching how to apply for a credit card with bad credit. There are also credit cards for the unemployed available in Australia. (Take a look at how to choose a credit card)

Pros

  • For almost all leading credit check companies, payment history is an important factor when calculating credit scores of individuals. As long as you make timely payments and have a high available credit limit, these cards can help you improve your score.
  • Most credit card issuers do not check credit scores for approval when it comes to no credit check cards. These are instant credit cards with immediate access in Australia.
  • If you use credit cards responsibly and build your score, you can upgrade to better cards and even get approved for bigger personal loans or car loans

Cons

  • Credit limits are lower and interest rates are higher than regular credit cards.
  • Usually, no perks or benefits are offered.
  • Some credit card providers may charge an exorbitant maintenance fee
  • Some credit cards with bad credit are secured, requiring you to make a refundable deposit, which decides the available credit limit on your card. If you are currently unemployed or are a student, you may not have funds for the deposit.

Most lenders who extend loans with no credit check also offer credit cards with no credit checks. These are instant approval credit cards which are usually unsecured.

Such lenders conduct soft checks or pre-qualifications to evaluate your chances of getting approved for a credit card. However, these credit inquiries do not form part of your credit history check and don’t appear in credit reports.

However, applying without checking whether a lender offers such credit cards can result in rejection and lower your score further as rejections get recorded in your credit report. You can use online comparison tools and identify credit card issuers who issue credit cards for people with bad credit. Doing so will also help you learn the credit card interest rates and other eligibility requirements.

Secured credit cards are an option if you are struggling for credit card approval with bad credit. While they require an upfront deposit, they can still help you to build your credit history through timely payments.

Even though the entry barrier for credit cards with poor credit is low, there is no guarantee that you will get approved for one.

Here are some credit cards for those with bad credit history where getting approval is comparatively easier:

  • Secured cards: It is easier to get approved for secured cards as the deposit absorbs the credit card company’s risk of lending to someone without any credit history or low credit scores
  • Student credit cards: These cards specifically cater to those about to begin their credit journey. However, there may be some minimum criteria to get approved, such as furnishing proof of income or getting a co-signer on the credit card application.
  • Store cards: Compared to traditional credit cards, the approval process of store cards is straightforward. But bear in mind that they offer lower credit limits and often charge higher interest rates.

Here are a few tips to help you use credit cards to build your credit score:

Pay your credit card bills by the due date

Delays or defaults in repaying credit card dues are reported to credit report agencies. This results in a reduction in credit scores. So ensuring timely repayments of your credit card dues can help you build up your credit score.

If you are struggling with the amount, you can also consider converting the dues into EMI to pay them off in smaller chunks.

Don’t apply for too many credit cards in a short time

When you apply for a credit card, lenders carry out credit checks. Such credit inquiries are considered hard inquiries and get added to credit reports. Each time there is a hard enquiry, your credit score goes down by a few points. Therefore, avoid registering for multiple credit cards at the same time.

If you simply wish to know more about the type of credit cards available in the market, use an online tool to compare offerings instead of sending your applications to card companies.

Set your own credit limit

Even though credit card issuers set the credit limit of your card beyond which you cannot spend, it is a good idea to self-regulate. Reckless usage of your credit card can incur more debt than you can service and contribute to poor credit scores.

Setting your own limit will ensure that your spending stays in check and you can repay the dues on time. Timely repayments go a long way in building your credit score.

Receiving credit card approval with bad credit can be notoriously tricky. Applying for cards and getting rejected multiple times can bring down your score further as these credit inquiries make it to credit reports.

Knowing your credit score is the first step to identifying the credit cards you may potentially qualify for. With ClearScore, you can access a free credit report and check your credit score easily.


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Written by Lloyd Smith

General Manager AU

Lloyd spreads the word about how awesome ClearScore is.