How to Get Unsecured Credit Cards for Bad Credit

Do you have bad credit or haven’t had the chance to build up credit? You might have a difficult time getting a credit card. Credit card companies use credit scores as a way to gauge how likely you’d be to pay back your credit card debt. 

There are a few options that you can use to get an unsecured credit card even if you have bad credit. Let’s take a look at the difference between secured and unsecured cards and help you get the card you need.

Here are also some of the steps you can take to improve your credit so you’re on track to get your next unsecured card.

What’s an Unsecured Credit Card?

You might have seen offers pop up for both “secured” and “unsecured” cards while searching for your credit card. 

An unsecured credit card is a credit card that doesn’t have collateral. Collateral is what you pledge as security for a debt, such as your car (for an auto loan) and your house (for your mortgage). Lenders extend you a line of credit, which you can access using a credit card or credit card number. 

At the end of the payment period, you pay back the amount that you borrow. All you need to do is to fill out an application and the credit card company runs a credit check before they approve you.

Though some unsecured credit cards charge an annual service or membership fee, you don’t need to put down a deposit to open an unsecured card. Most credit cards issued are unsecured cards.

The opposite of an unsecured credit card is a secured card. When you open a secured card, you put money down and borrow only up to the amount you put down. For example, let’s say that you open a secured credit card with a $500 deposit. 

After you put $500 down, the credit card provider issues you a card with a $500 limit. You can then use the card like a regular credit card, paying back what you owe over time, which builds your credit. If you decide to close the card, your lender issues your $500 deposit back to you.

Secured credit cards are safer for lenders because there’s no risk if you don’t pay back your bills. The lender simply keeps your deposit if you ring up $500 on your card and then never pay back any of it. If you have bad credit, you’ll have a much easier time getting a secured card than an unsecured card.

How Do Unsecured Credit Cards Work?

Unsecured credit cards aren’t difficult to understand. Your lender issues you a line of credit that you can use to make purchases. These cards represent a form of debt, so lenders need to be much pickier about who can and can’t get an unsecured card.

Lenders manage this risk by running credit checks before they issue unsecured cards. 

Credit card companies like working with borrowers who have good credit and offer incentives for these borrowers to open a new card. Some of the most common incentives are airline miles, low interest rates and cashback.

You can use an unsecured credit card almost anywhere that you use cash by inputting your number and verification code on the back of the card. Some physical stores have switched over to cashless payment systems to fight against fraud and robbery.   

Unsecured credit cards also often feature rewards programs and cash back plans — features that are rare with secured cards.

What to Look for in an Unsecured Credit Card

You don’t need to settle for a secured credit card if you have bad credit. You can find an unsecured card even with less-than-stellar credit — you just need to know what you’re searching for. Here are a few features to hunt for, as well as a few red flags to be aware of. 

Features of good cards

Clear credit requirements. Almost every credit card has credit requirements — even if those requirements are low. Applying for almost any unsecured card requires a hard check on your credit report, which lowers your score. 

Before you apply for a credit card, you should know what your credit score is. Trustworthy credit card providers tell you if they have a minimum credit score. This helps you avoid wasting an inquiry on a credit card you don’t have a chance of getting an approval for.

No annual fee. Some top-of-the-line credit cards have an annual fee you must pay to keep your credit line open. While these cards usually offer more rewards and bonuses, they’re often aimed at borrowers with higher-than-average credit scores. 

If you’ve had trouble making your credit card payments in the past, it’s usually not a good idea to add another fee onto your list of bills. Avoid cards that charge an annual fee and instead look for cards that advertise free maintenance.

Special student offers. Chances are that you don’t have much credit to your name if you’re a college student or you just graduated high school. Even if you’ve never missed a bill, you might still not have enough credit history to get an unsecured card. Some credit card companies offer special cards aimed at students. 

These student credit cards often have low lines of credit and no annual fees. Opening a special student credit card is easy as long as you have a .edu email, and these cards can help you build credit later on. 

Red flags to watch out for

Credit card fraud and scam offers are common. Here are some red flags to look out for when you compare credit card offers. 

Very high credit limits. Getting approved for $10,000 worth of credit sounds like a once-in-a-lifetime opportunity. Unfortunately, the truth is that no legitimate lender will offer so much unsecured credit to you if you have bad credit. These credit card offers may be outright scams, or they may have hidden fees and charges. Be very wary of credit cards that advertise high credit lines for those with bad credit.

High interest rates. You probably won’t be able to get the same interest rate as your friend who has good or fair credit if you have bad credit. However, some credit card companies prey on those with bad credit by approving them for cards with very high interest rates. Make sure you read the fine print on every card you consider and compare rates before you choose. Be very cautious of credit cards that attempt to hide their annual interest rates.

Additional fees. Reputable credit card lenders tell you exactly how much you’ll pay in fees when you open a card. While late payment fees and annual fees aren’t signs of a scam, you should look for a credit card provider that doesn’t try to hide or obscure fee charges. Read the fine print of any offer you receive and keep your eyes peeled for unclear fees. Some common excessive fees include “administration fees” and “application charges” that aren’t clearly defined.

No spending monitoring. It’s especially important that you keep an eye on your spending if you have bad credit. If a credit card offers no way to check in on your finances, you should avoid it at all costs. These cards often have hidden fees that they add to your monthly statements without disclosing them to you each month. Instead, look for a card that offers a mobile app or text alert system that tells you when your payments are due.  

How to Apply for an Unsecured Credit Card with Bad Credit

Are you ready to get started applying for unsecured cards? Here’s the general process you’ll follow when you apply. 

Check your credit score

Do you know your credit score? Your score may have improved over time without your knowledge. Sign up for a free credit monitoring service (like the one offered by MoneyLion) and keep track of your credit score. You may want to check your credit report for errors if your score seems lower than it should be.  

Compare credit card offers

Explore your credit card options online. You may want to begin with major credit card companies or you may want to talk to a representative from your bank to learn about any special offers they’re running.

Look for credit cards that don’t specify that you need at least “fair” credit to apply. Remember to read the terms and conditions on each card before you apply to compare interest rates. MoneyLion’s loan marketplace has different types of credit offers in its app, including cards for various credit types.

Fill out an application

Fill out an application with the lender after you’ve decided which credit card offer is right for you. When you apply, you’ll need to provide some basic information on your identity and income and approve a credit check. Avoid applying for too many credit cards, as each application triggers a “hard check” on your credit report. 

Start Working On Your Credit

After you’ve completed your application and gotten approval, you can start using your new card. However, you should also focus on building up your credit for the future. Here are some ways you can begin building your credit:

  • Remember to pay your credit card bills on time, every time.
  • Watch your credit utilization, or the amount of available credit you spend.
  • Monitor your credit score over time using a free credit monitoring service.
  • Pay down other sources of debt in your life. 

MoneyLion can help you focus on building your credit with its credit builder loans and also monitor your credit with free credit monitoring.

Finding the Best Card for You

Are you struggling to get an unsecured credit card due to poor credit? MoneyLion offers a number of products that can help you improve your score and get the cards you need.

From 24/7 credit monitoring to a MoneyLion membership with fast access to 5.99% APR Credit Builder Loans that don’t require a credit check, MoneyLion is here to help you get more access to the credit cards that you need. 

Download the MoneyLion app from the Apple App or Google Play store today to get on the path toward a better credit score.