With a low credit score, it’s exceedingly unlikely that you’ll get the attractive offers that flooded your mailbox when your credit report was pristine. If you sit out the credit card market waiting for high-limit, low-rate card offers to reemerge, however, you may be waiting forever. Even as old debts age off your credit report, you’ll still need a track record of responsible credit card use to obtain an excellent credit score. A low-limit card, on your own or with a co-signer, can be that first step.
Authorized Users and Cosigners
Those unable to qualify for any credit cards on their own may need to ask a family member or friend for assistance. A parent may be willing to add you as an authorized user. This gives you a credit card in your own name and the right to make charges, but no responsibility for paying the bill. In many cases, authorized users get credit for payments made by the main account holder, so as long as your parent pays on time, your score will benefit. A cosigner, on the other hands, helps you get your own card by agreeing to pay the bill if you are unable to. For a cosigned account, the bill comes to you and you’re responsible for paying it.
You back a secured card with a deposit that’s usually equal to your credit line, which the issuer can use to settle your account if you don’t pay your bill. It’s a low-risk deal for the issuer, but make sure it’s providing something to you in return. Confirm that the card issuer reports your activity to the three major credit reporting bureaus, which will help raise your credit score if you pay your bill on time each month. Also seek out a secured card with a low interest rate and low fees. If the rates on all your options are too high, pay off the balance in full each month.
Even if you have poor credit, some lenders may be willing to issue you a low-limit unsecured card. You may even receive offers saying you're preapproved, though the rates for such cards generally are cringe-worthy. If you're applying on your own rather than to a solicited offer, you’re unlikely to be instantly approved. Instead, the lender likely will review your application more carefully, and it may take a few days for a decision. Fees and interest rates for unsecured cards tend to be high, with issuers knowing that you don’t have many other options.
Though retail cards tend to be issued by the same banks that offer unsecured cards, you may find one easier to get. Some retailers have a lower credit score threshold for acceptance, and the fact that you can use the credit line only at that store is a powerful motivator for granting credit. Retail cards tend to carry higher interest rates on unpaid balances than conventional unsecured cards, so don’t charge what you can’t pay off quickly. Otherwise, your balances will rise too high to see credit score improvement.