Having bad credit can be worse than having no credit at all. A lousy credit score can lead to a steeper credit hole to climb out of, and can take years to fix.
All is not lost. Borrowers with bad credit scores can still get approved for a new credit card, though they’ll have to jump through a few more financial hoops than other people.
If you’re trying to qualify for an unsecured card because you have bad credit, here are some things you’ll need to provide:
Proof of Income
The Credit Card Act of 2009 requires that borrowers be checked that they have an “ability to pay” to have credit extended to them. That can include proof of your annual income, as well as your partner’s.
The credit card issuer may have minimum income requirements of $10,000 or $12,000 per year. If you earn less than that, or you already have too much debt, you may be denied.
Bank Account
A checking or savings account may be needed to determine your financial stability. If you can’t find a bank that will let you open an account because you have a poor banking history, look for a bank or credit union that offers “second chance” accounts.
These accounts often don’t have overdraft protection, but can have low or no monthly fees and no minimum balance requirements, so you can rebuild your banking history.
NoCredit History Red Flags
Most credit cards run credit checks to look for signs that your financial life is getting worse. Bankruptcy, liens, lawsuits and debt, among other things, could hurt your chance of getting approved.
Before applying for a credit card, clean up your existing accounts by getting caught up on payments and paying your bills on time.
A bankruptcy can be one of the biggest roadblocks, so you may want to try getting a credit card from your local bank or credit union, which might have less strict requirements for their credit cards.
No Bad Blood
Lastly, having a clean history with the credit card company that you’re trying to get a new credit card from can help your application. If you’ve defaulted on payments with a certain company, you may be better off not seeking a credit card from them for a while and focusing on a company that you’ll have a clean slate with.
Bear in mind banks are always looking for business, so finding a credit card somewhere while you try to rebuild your credit shouldn’t be impossible.
Published with permission from RISMedia.