What you need to know:
- It's very hard to get approved for a credit card when you have bad credit.
- You're better off fixing your credit problems before applying for a card.
- A short-term loan or bad credit personal loan might be a safer option.
Bad credit credit cards
Don't apply for a credit card when you have bad credit. Fix your credit problems first, and consider applying for other types of finance.
We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!
- Are you in financial distress? Talk to your current bank before applying for more credit. You can also call the National Debt Helpline on 1800 007 007.
Why it's risky to apply for a credit card if you have bad credit
Being an applicant with bad credit means you're having trouble paying off your existing debts. This means you're likely to be rejected if you apply for a new credit card. You're a risky borrower from the card provider's point of view.
But here's where it gets worse. Getting rejected for a loan application is a negative mark on your credit score. This means that a borrower with bad credit who applies for a credit card without fixing their credit problems is only going to decrease their credit score.
4 steps to fix your credit problems before applying for a card
Step 1: Pay off existing debt. If you've got a loan, outstanding bills or other credit-card debt, start making regular repayments. When a lender checks your credit report, seeing that you're making regular repayments towards your existing debt will be viewed positively.
Step 2: Start saving. We know it might be easier said than done, but having some savings in the bank shows lenders that you'll be able to repay your credit card in the future.
Step 3: Wait until you meet the eligibility criteria. Most credit cards list a minimum income requirement for approval. If you don't meet that threshold, you will automatically be rejected. Look for cards with a low minimum-income requirement or wait for the card you want.
Step 4: Get help if you need it. If you're struggling financially and would like to speak to someone for free financial advice, information and assistance, you can call the Financial Counsellors hotline on 1800 007 007 (open from 9:30am to 4pm, Monday to Friday).
How do I check my credit score?
It's always a good idea to check your credit score before applying for a loan or credit card. You might not even be aware that you have bad credit until you check.
You can check your credit score for free through Finder at the link below.
Get your free credit report and credit score
Once you've got your credit score, you can see if there are any issues and take steps to address them. You might even find there's a mistake in the report, such as a debt that doesn't belong to you.
You can get these errors fixed and improve your credit score. But you won't know about them until you check.
You can also check out our DIY credit repair guide for more help.
Bad credit alternatives to credit cards
There are no specific credit cards for people with bad credit. That's part of why it's hard to get approved for a card as a borrower with bad credit.
A better option might be other forms of credit, like a short-term loan or a bad credit personal loan. These products are often designed for borrowers with bad credit.
- Short-term loans. This is a loan of up to $2,000 that has to be repaid between 16 days and 1 year, but usually terms are around 62 days. Keep in mind these loans come with high fees (a 20% establishment fee and a 4% monthly fee) so really consider how much you need it before you apply.
- Bad credit personal loans. If you're in need of a larger amount than a short-term loan offers, there are some bad credit personal loans available that can offer amounts up to $5,000 or even $10,000. These loans usually come with a flat interest rate and, if you repay responsibly, can be used to rebuild your creditworthiness.
- Low-limit credit cards. If you have bad credit and you're working to improve it, consider a card with a low minimum credit limit. This reduces the risk to the lender and you may be more likely to get approved. Once you prove that you can make repayments and are doing so regularly, you can choose to apply to increase your limit in the future.
Frequently asked questions about bad credit credit cards
More guides on Finder
-
Citi Premier Card – Velocity Points Offer
The Citi Premier includes a big bonus points offer, discounted annual fee options, lounge passes and more. Get the details here.
-
The Future of Credit Cards report 2022
Finder’s Future of Credit Cards report explores the trends shaping credit cards and digital payments, including the rise of BNPL.
-
Point-to-point frustration: Why it can be very difficult to get a refund for an outrageous taxi fare in Australia
If you are overcharged by a taxi in Australia, chasing a refund is hard work. Here's why the industry needs to change if it is to survive.
-
American Express Corporate Platinum Card
With a 400,000 bonus Membership Rewards points offer, lounge access and management tools, is this Amex account right for your company?
-
American Express Corporate Card
This Amex charge card offers a mix of management tools and perks for big companies – including a 50,000 bonus Membership Rewards offer.
-
American Express Corporate Gold Card
Designed for big companies, this Amex charge card offers a mix of management tools and perks – including a 100,000 bonus Membership Rewards points offer.
-
American Express Qantas Corporate Gold Card
With a 100,000 bonus Membership Rewards offer and complimentary Qantas Business Rewards membership, is this the right card for your business?
-
Bank of Melbourne Vertigo – Purchase Offer
Compare the features of the Bank of Melbourne Vertigo including a 0% promotional offer on purchases and a first-year annual fee waiver.
-
St.George Vertigo Card – Purchase Offer
Offers no annual fee in the first year and 0% introductory rate on purchases for the first 18 months.
