Credit building credit cards for bad credit

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If you don’t have a strong credit score, you’ve probably learned how difficult it can be to qualify for a credit card — in turn making it even harder to improve your credit.

Secured credit cards are a great credit-building option, but they’re not the right fit for everyone. You might be able to make regular payments toward your monthly credit card purchases, for example, but not have the cash upfront to secure a minimum deposit. 

While they are less common, and can offer less favorable terms than other cards, there are some unsecured credit cards available for people with bad credit. If you’re ready to commit to the healthy credit habits that will help you secure and maintain a great credit score over time, these cards can be helpful tools.

Here are a few of the unsecured credit cards we like most for building credit:

Before You Start

If you already have bad credit, it’s essential to pay down any existing high interest debt and develop a solid plan for avoiding new debt before opening any new card account. Make sure you have the money to pay down any charges you make in full, and develop a habit of paying your bill on time each month. If you carry a balance on a new unsecured credit card, you’ll risk damaging your credit score even further, and falling deeper into debt.

Good for Cash Back

Credit One Bank® Platinum Visa® for Rebuilding Credit

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Good for Alternative Approval Process

Petal® 2 “Cash Back, No Fees” Visa® Credit Card

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Best Unsecured Credit Cards for Bad Credit Summary

Credit One Bank® Platinum Visa® for Rebuilding Credit

Good for: Cash Back

Earn 1% cash back on eligible gas and groceries, as well as monthly mobile phone, internet, cable, and satellite TV services. Your annual fee will be $75 the first year, then $99 annually (billed at $8.25 per month) and a variable APR of 26.99% applies.

Petal 2 Visa Credit Card

Good for: Alternative Approval Process

The Petal 2 Visa Credit Card, issued by WebBank charges no annual fee and comes with a variable APR of 15.99% to 29.99%. You can get pre-approved online without a hard inquiry on your credit report, and may even get approved without a credit score by linking your bank account with your application, so Petal can assess your bill payment history to determine eligibility.

Capital One Platinum Credit Card

Good for: Building Credit

The Capital One Platinum Credit Card is a no-frills card for building credit through responsible credit use. The 28.49% variable APR is high, but there’s no annual fee and Capital One automatically reviews your account starting after six months for credit line increases.

What Is an Unsecured Credit Card?

An unsecured credit card is probably what comes to mind when you think of a typical credit card. Unlike secured credit cards — which require an upfront deposit that acts as your credit line — unsecured credit cards do not require any collateral to secure the line of credit you can borrow against. When you’re approved for an unsecured credit card, your credit limit is based on factors like income, your credit history, and other debts you have (personal loans or other credit card debt, for example).

Unsecured credit cards range from credit-building cards like the ones on this list to the most premium travel rewards credit cards. These cards can offer great spending power and even help you save money, but they also require responsible use to avoid high interest debt. Credit cards often carry extremely high APRs, which begin to accrue on any balance you don’t pay off in full when your statement balance is due each month. 

Secured Cards vs. Unsecured Cards

The biggest difference between a secured and unsecured card is the deposit. When you open a secured credit card, you’ll need to secure your line of credit with an upfront security deposit. This works similarly to a secured loan, which requires some form of collateral. In most cases, the amount you deposit toward your secured credit card will equal your credit limit. For example, if you apply for the Discover it® Secured Credit Card and put down the minimum deposit requirement of $200, Discover will assign you a credit limit of $200. 

Many secured cards allow you to deposit more money over time to increase your credit line. Plus, when you’re ready to close your card account in good standing, or you qualify to upgrade to an unsecured card, you’ll receive the deposit back in full. 

Unsecured cards don’t require an upfront deposit as collateral. However, if you’re approved for an unsecured credit card and you have less-than-great credit, you may be assigned a low credit limit. A low credit score or little credit history can be an indicator of risk to issuers — the more evidence you can show of using credit and paying it back over time, the more likely an issuer is to trust you with a larger credit line.

Both secured and unsecured credit cards can be helpful tools for building credit, as long as your issuer reports your credit movements, including on-time monthly payments, to the three credit bureaus regularly.

Can an Unsecured Credit Card Help You Build Credit?

Practicing healthy credit habits with a credit card — whether secured or unsecured — is one of the most effective ways to build credit. 

Your payment history is the most influential factor in your credit score, so it’s important to pay your credit card bill early or on time each month to build a strong positive payment history. And to avoid high interest debt, only charge purchases you know you can afford to pay off in full by the time your statement is due.

Credit utilization ratio is the second-most influential factor in your score, and is greatly affected by how you use your credit card. This ratio refers to the amount you owe in relation to your credit limit, and applies to individual accounts as well as your overall available credit. Avoid spending more than 30% of your credit limit in any given month to maintain a healthy credit utilization rate. You may get even better results if you’re able to keep your utilization rate below 10%. 

Other factors that make up your credit score include the length of your credit history, new credit, and your credit mix, though they aren’t as influential to your score as payment history or utilization. Boost your credit by maintaining your credit accounts in good standing for as long as possible — even if you’re not using them — and avoiding opening or closing too many accounts within a short time period.

Methodology

EDITORIAL INDEPENDENCE

As with all of our credit card reviews, our analysis is not influenced by any partnerships or advertising relationships.

We believe the most important reason for anyone with bad credit to use a credit card is as a tool to improve their credit score and build good credit habits. As a general standard, any card on our list must report regular payments to the three credit bureaus. We also prioritize cards that offer pre-qualification before applying and credit-building tools to help with improving your credit score. Other factors we consider include annual fee, APR, other fees, any rewards or benefits, and more.

*All information about the Credit One Bank® Platinum Visa® for Rebuilding Credit has been collected independently by NextAdvisor and has not been reviewed by the issuer.