If you have bad credit, there is a light at the end of the tunnel. Rebuilding your credit doesn’t have to be hard. And, surprising to some, a credit card may be the perfect way to get started. It takes credit to build credit.
Opening a new credit card and building a perfect on-time payment history while keeping your balance low is the best way to rebuild credit for most people. The trick is always paying on-time and never spending more than you can afford to pay in full each month. If you can do stick to that plan, one of these credit cards is likely the best choice.
If you pay off a credit card in full by the due date, you won’t have to pay any interest, so I’m not adding interest rates below! You don’t have to use a card every month to build credit. If you want, you can use it just a few times a year for lunch or for a small subscription. Set it up for automatic payments and you’ll never miss a due date!
Capital One Secured Mastercard
The Secured Mastercard from Capital One is great for its low costs and ability to get access to a bigger credit line after just five months. The card requires a $49, $99, or $200 refundable deposit based on your credit score and the size of your credit line. If you make the first five monthly payments on time, you’ll get an automatic upgrade to a higher credit limit.
The card charges no annual fee. The card lets you pick your monthly due date to help you get back on track with a perfect payment history on a new account. Setting up automatic payments can help too.
It offers some great benefits including rental car coverage, travel accident insurance, automatic extended warranty for eligible purchases, and no foreign transaction fees. Those are excellent for a card with no annual fee.
The Citi Secured Mastercard offers credit limits from $200 to $2,500 based on your credit history and requires a deposit equal to your credit limit. It charges no annual fee. Funds are typically held for 18 months before a review to decide if you can get your deposit back and keep the account active.
The account doesn’t have a ton of bells and whistles. The most unique feature is the relatively high $2,500 limit for some users, which is more than you can get with most secured cards. This makes it easier to keep your credit utilization low, a metric used in calculating your credit score.
The card is a bit more rigid than some, requiring a year and a half before a credit review to return your deposit. But if you can make on-time payments 18 months in a row, you’ll be well on the way to an improved credit score.
Navy Federal Credit Union nRewards Secured Credit Card
If you are a military household or veteran, Navy Federal Credit Union is a great financial institution worth considering for a range of products. Those include the nRewards Secured card. This credit card has no annual fee, no balance transfer fee, no foreign transaction fee, and no cash advance fee. That no-fee combo is almost unheard of in the world of credit cards.
Cardholders earn 1 point per dollar spent. Points can be redeemed for cash back at a rate of 1 point = 1 cent. You can redeem points for a statement credit or transfer to a linked savings account. That’s like getting 1% cash back.
Navy Federal specializes in dealing with issues common for military families, such as interest rate limits that may apply for active duty and deployed members of the armed forces. It can be a great choice to get your credit going with the right foot forward.
The OpenSky Secured Visa is available with no credit check required. Even most cards for people with bad credit take a peek at that number before issuing a card. This one doesn’t pull your credit and offers credit lines from $200 to $3,000 with some non-credit factors used for approval.
The biggest downside is a $35 annual fee. With that cost in mind, it’s best to use this card if you can’t qualify for a card that doesn’t charge a fee and you want to get to work fixing that credit score right away. After a couple of years, it may be a good idea to replace it with another card that doesn’t charge an annual fee or offers rewards or better benefits with an annual fee. It also charges inactive account fees after 12 months.
If your credit is solidly in the bad credit range, OpenSky Secured Visa could be a good option to turn things around. It also offers high credit limits if you qualify. Just be careful with that annual fee while rebuilding your credit score.
Honorable mention: SelfLender
SelfLender isn’t a credit card, but it is a great service worth mentioning for people looking to rebuild their credit or establish credit for the first time. SelfLender is an online loan where you make a monthly payment that builds your credit, but it isn’t a traditional loan.
SelfLender does charge interest, but the bulk of your monthly payment is deposited into a savings account while payments are reported to all three credit bureaus. At the maturity date for your loan, you get the cash back. Accounts start with monthly payments of $25+ for 12 or 24 months. SelfLender charges a one-time $15 fee. It’s a fun and non-traditional path to fix your credit with no credit check required.