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Credit card options when you have bad credit
What are your credit card options when you have bad credit? Learn about rebuilding your credit history if you have bad credit.
If you have bad credit score, applying for a credit card can be a difficult and stressful process, but it’s not impossible.
If you think you may have bad credit and you’re in the market for a credit card, it’s important to compare all your options and do your research first, especially around your credit score. This can help ensure you’re getting the most competitive product and not further negatively impacting your credit rating.
Here’s what you need to know about getting a credit card if you think you have a bad credit score in Australia:
Can I get a credit card with bad credit?
Short answer - yes, but it can be a difficult process as it depends on each credit card provider’s eligibility criteria. As your credit file is checked every time you apply for a credit card, a bad credit score can affect your chances and can complicate the process.
Are there credit card providers who don’t perform a credit check?
In Australia, it’s not currently possible to get a credit card from a lower-risk provider without a credit check. However, there are ‘no credit check’ providers out there – also known as payday lenders.
While this may seem inconvenient, it’s in your best interest if you’ve got bad credit. If you are rejected by a credit card provider, this can negatively impact your credit score. Making an application for a credit card when you have bad credit, and then being rejected, may make matters worse.
Instead you could look to lenders or platforms that perform ‘soft’ checks (pre-qualifications showing your chance of approval) that won’t show up on your credit history, and try to apply for credit cards that better suit your financial situation.
Warning - don't apply just yet!
Every time you apply for a credit card, or any financial product, the lender will perform a ‘hard’ inquiry on your credit report. If you are rejected, this will negatively impact your credit score and show up on your credit history for up to 12 months. Read on to learn how to best avoid hurting your credit score further...
How can I get a credit card with bad credit?
To help improve your chance of approval and decrease your risk of negatively affecting your credit score, you could use comparison tools to find credit cards that better suit your financial situation i.e. targeted to low income earners, people with bad credit etc.
RateCity.com.au’s credit card comparison table allows you to search, filter and compare competitive credit card options that could potentially suit some people with bad credit. Use this tool to search through credit card interest rates, find out who the credit cards are suitable for, and what minimum income requirements could be.
Who offers credit cards for bad credit with guaranteed approval?
Guaranteed approval is impossible to come by in Australia, and there is no universal definition of bad credit. Each lender will have their own criteria around bad credit classifications, and how this determines your eligibility and chance of approval.
How do I get approved for a credit card for bad credit?
There are a few things you can do to help improve your chance of approval when applying for a credit card with bad credit:
1. Pay your debts
When a lender assesses your credit card application, they’ll look at your repayment history on any other cards or loans you have. If you can show that you’ve been consistent with meeting your repayments and paying off more than the minimum monthly credit card repayment, you may have a better chance at improving your credit rating, and therefore being approved.
If you have multiple sources of debt (personal loan, credit card etc.) consider focusing on one debt at a time and budget to pay it off. Once you know how much you owe, you can set money aside to pay one debt off at a time, starting with the debt with the highest interest rate first. If you have any additional cash left over at the end of your pay cycle, you could put it towards the debt as well. Learn more about how to repair your credit score.
2. Wait until you can afford the repayments
In Australia, a lender can’t legally give you a credit card unless you have enough annual income to meet the card’s minimum repayments. If you don’t have a regular income or can’t prove your income, you may want to hold off applying for a credit card until you’re in a better position.
Alternatively, you can compare credit card options for those with low annual income here.
3. Go through your credit history
Credit reports sometimes contain mistakes. Common errors include your name being credited with the debt of a family member or stranger with a very similar name to yours. You can also add positive information to your credit report that shows stability in your personal and financial life, such as a full-time job, owning a home and living at one address for a number of years.
Working on clearing your bad credit rating can make applying for a credit card in the future a much simpler process.
4. Get saving
Lenders will go through your bank statements to determine your eligibility, so if you’re able to show that you have some savings, you’ll demonstrate that you can stick to a budget and have self-control with your finances.
What other options are available?
If you're not confident that a credit card is the right choice for your financial needs, you could consider other financial products, such as personal loans. Learn more about applying for a personal loan with bad credit.
Do you need financial counselling?
If you’ve got bad credit and you find yourself in a dire financial situation, it may be wise to seek financial counselling before applying for any further loans or credit cards.
A professional financial counsellor can help you work through a debt consolidation plan and help facilitate smarter choices to clear your bad debt. If you know you’ve got bad debt and you’re struggling to make repayments, contact your lender. A proactive approach may help put a plan in place before it’s too late.
To find your nearest financial counsellor, or for more information, please visit ASIC’s MoneySmart website.
Related pages:
Credit card offers on RateCity are not specifically bad credit credit cards. We show you these credit cards to help you compare what’s available in the Australian credit card market, and make a more informed financial decision.
If you have bad credit, before you apply for a credit card, consider checking your credit report, taking some time to improve your credit history, or contacting a lender to learn more about their credit requirements. If you need more help, you can also contact a financial counsellor.
