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Best Credit Cards for Rebuilding Credit

Best Credit Cards for Rebuilding Credit

*Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any credit card issuer. This site may be compensated through a credit card issuer partnership.

This article was last updated Oct 04, 2019. Terms and conditions may have changed. For the most accurate information, please consult the issuer website.

If you need to rebuild your credit score, don’t panic. Even if your credit is bad, getting the right credit card that matches your credit profile and following good credit behavior consistently over time can bring your credit score back to life.

In this article:

First, it’s important to understand what’s meant by a “bad” credit score. One of the most commonly used credit scoring models is the FICO Score. When it comes to the FICO Score, anything under 580 is considered poor. If your score is in the 580 to 669 range, that’s considered fair. Anything above that range is marked as good, very good or excellent, as illustrated below.

Second, the two most important things you can do to improve your credit ranking are to make on-time payments and to avoid using too much of your credit card’s available credit. These things make up 35% and 30%, respectively, of how your FICO Score is calculated.

With that said, let’s look at your options — starting with secured credit cards.

Rebuild credit with a secured credit card

A secured credit card differs from an unsecured card in that it requires you to make a security deposit, which usually serves as your credit limit: if you deposit $200 with a secured card issuer, you’ll likely have a credit limit of $200. The deposit does not cover your payments — you’ll still need to make payments to cover what you charge to the card — but rather reduces risk for the bank issuing the credit card.

If you can afford the deposit, applying for a secured card is a great way to build your credit. Most secured credit cards report to the major credit bureaus just like unsecured cards do, so that your on-time payments are tracked on your credit history.

With such a small credit line, it’s important not to max out the card, but only charge just a small purchase to the card every month that you can afford to pay off when the bill is due. That way, you keep your credit utilization low, which will also help your credit score.

Read: Where to Find High-Limit Secured Cards

Just remember that you should always pay the entire balance to avoid incurring interest charges. Secured cards often have high APRs, which means carrying a balance can become costly very quickly as interest is applied to any balance that carries over to the next statement.

Here are some secured credit cards we recommend considering as you rebuild your credit:

  • 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases every quarter, automatically. 1% unlimited cash back on all other purchases.

  • Credit line will equal your security deposit of $200 or more*

  • No annual fee, no late fee on your first late payment. No penalty APR*

Highlights
  • No Annual Fee, earn cash back, and build your credit with responsible use.
  • It's a real credit card. You can build a credit history with the three major credit bureaus. Generally, debit and prepaid cards can't help you build a credit history.
  • Establish your credit line by providing a refundable security deposit of at least $200 after being approved. Bank information must be provided when submitting your deposit.
  • Automatic reviews starting at 8 months to see if we can transition you to an unsecured line of credit and return your deposit.
  • 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases every quarter, automatically. Plus, earn unlimited 1% cash back on all other purchases.
  • Get 100% U.S. based customer service & get your free Credit Scorecard with your FICO® Credit Score
  • INTRO OFFER: We automatically match all the cash back you've earned at the end of your first year.
  • Get an alert if we find your Social Security number on any of thousands of Dark Web sites.* Activate for free.
  • See Rates & Fees

See additional details for Discover it® Secured

More Info

The Discover it® Secured comes up on our lists of best secured credit cards quite often, and for good reason. This card has a $0 annual fee and offers 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases every quarter, automatically. 1% unlimited cash back on all other purchases. In addition, Discover will automatically match ALL the cash back you earn at the end of your first year.

At 24.74% Variable, the regular purchase APR is high. But if you pay this card off in full each month, it’s a great opportunity to earn cash back while building your credit. After you’ve had the card for eight months, Discover will conduct monthly reviews to see if you’re eligible to upgrade to an unsecured card and get your security deposit back.

The Amazon Prime Store Card Credit Builder was specifically designed for people who want to build their credit. If you’re an Amazon Prime member, you can Earn 5% back on all Amazon.com purchases. If you’re not a Prime member, you won’t get cash back, but you still get the chance for promotional financing (a window of time to pay off a purchase without accruing interest) on eligible purchases of $149 or more.

This card has a $0 annual fee. Its APR, at 28.24% (variable) is high — so try to avoid carrying a balance.

After you’ve had the Amazon Prime Store Card Credit Builder for at least seven months, Amazon will review your account to see if you’re eligible to upgrade to the Amazon Prime Store Card, which is an unsecured card with similar benefits.

The information related to the Amazon Prime Store Card Credit Builder and Amazon Prime Store Card has been collected by CompareCards and has not been reviewed or provided by the issuer of this card prior to publication.

  • Free Credit Bureau Reporting

  • $200 - $3,000 Credit Line*

  • 19.14%*

Highlights
  • Build Your Credit fast with our monthly reporting to all 3 major credit bureaus.
  • Choose your credit line as low as $200 up to $3000, secured by a fully-refundable* security deposit.
  • Security deposit needs to be submitted before the credit card can be issued.
  • No credit check necessary and no checking account required; apply in less than 5 minutes.
  • Extra credit when you need it, increase your credit line up to $5000.
  • Access to online financial education.
  • *View our Cardholder Agreement located at the bottom of the application page for details of the card. 

See additional details for OpenSky® Secured Visa® Credit Card

More Info

The OpenSky® Secured Visa® Credit Card is a bit different than other cards on this list. For one thing, it comes with a $35 annual fee. However, it doesn’t require a credit check to apply, so if you’re worried about getting turned down for other cards, this one is worth considering. The APR is 19.14%.

Sign up for a store credit card

If a store card is co-branded with Visa or Mastercard, you can use the card anywhere Visa or Mastercard are accepted. However, if it’s not, then you can only use it at the store issuing it.

In many instances, general-purpose credit cards will serve you better than store cards, which often attract customers with discounts and then charge high ongoing interest rates. However, a store card might be a way you can rebuild your credit and may make sense if you shop at a store frequently, and you can pay your purchases off in full so as to avoid interest accruing. Know that retail cards often come with initial low credit limits, which reduce lender risk, but also make them easier to qualify for.

Here are two store cards worth considering:

The Walmart Rewards Card offers 5% back on purchases made at Walmart.com and on the Walmart app, 2% back on Walmart purchases in stores outside of the introductory offer; and 2% back at Walmart Fuel Stations. It has a $0 annual fee.

If you frequent Target, however, you might consider the Target REDcard Credit Card. It offers a 5% discount on Target and Target.com purchases and comes with an APR of 24.65% variable. As with the other cards listed, you should pay in full the amount you charge to the card each month, and keep your credit utilization low.

The information related to the Walmart Credit Card and Target REDcard Credit Card has been collected by CompareCards and has not been reviewed or provided by the issuer of this card prior to publication. These offers and/or promotions may have since changed, expired, or are no longer available.

Try prequalifying for an unsecured credit card

If your credit is poor, you’re likely to have a hard time qualifying for regular, unsecured cards. You should consider applying for a secured card first — and once you’ve demonstrated responsible usage, some issuers will even upgrade you from a secured card to an unsecured one.

Otherwise, monitor your credit score and as it moves from poor to good, then your approval chances for an unsecured card will increase.

However, if your credit is at least in the fair range, it might be worth considering some basic unsecured credit cards. Many issuers offer prequalification tools where you enter some basic personal information for a soft inquiry (which won’t hurt your credit score) to see if you qualify for any of their cards.  Capital One and American Express, for example, offer online prequalification tools.

Otherwise, here are two cards that you might want to take a look at:

The Capital One® Platinum Credit Card is a no-frills credit card. It doesn’t offer rewards, charges a $0 annual fee, and comes with 26.46% (Variable) APR. If you have limited credit history or a less-than-stellar credit score, this could be a great starter card. After you make your first five payments on time, Capital One offers access to a higher credit limit on this card.

  • Up to 1.5% cash back after making 12 on-time payments, 1% cash back on all purchases - right away

  • Build credit without having to put down a security deposit

  • No annual fee, no foreign transaction fees, and no late fees

Highlights
  • Up to 1.5% cash back after making 12 on-time monthly payments. 1% cash back on purchases right away
  • No fees whatsoever. No late fee, international fee, annual fee, or any-other-kind-of-fee, fee
  • Build credit alongside tens of thousands of Petal Card members
  • Cash flow technology can help applicants without credit history get approved
  • $500 - $10,000 credit limits
  • Petal's mobile app makes it easy to manage your money, track your spending, and automate payments
  • See if you're pre-approved within minutes without impacting your credit score
  • Petal reports to all 3 major credit bureaus
  • No deposits required
  • Card issued by WebBank, member FDIC

See additional details for Petal Visa® Credit Card

More Info

The Petal Visa® Credit Card doesn’t require a credit score to apply. Instead, you link your bank accounts during the application process, and an algorithm will analyze your bank statements and data such as money earned, money spent, and bills paid to evaluate your creditworthiness.

If you’re approved for this card, your credit limit will range from $500 to $10,000. The APR range is 14.74% - 25.74% Variable, and the annual fee is $0.

What cards to avoid when rebuilding your credit

If a card issuer charges a multitude of fees — such as processing fees, monthly service fees, and credit limit increase fees — avoid them. Credit One and First Premier are two such issuers that you should avoid, since carrying their cards can quickly become an expensive proposition.

You should also avoid payday and title lenders. These lenders generally charge exorbitant interest rates that can trap you in a vicious cycle of debt. Plus, many of them don’t report to the credit bureaus, which means that even if you pay off a loan with them, it won’t build your credit.

The bottom line

Rebuilding a less-than-stellar credit score might seem like a daunting task, but with the right plan, and some time and patience, it can be quite achievable. Whatever credit card you end up with, always pay on time — and if you can, pay in full to avoid interest charges. Keep your credit utilization under 30% (for example, if you have a card with a $500 limit, try to keep less than $150 on it at any given time).

Read: Best Credit Cards for Bad Credit

Like much in life, consistency is key. Get the right card, make a smart plan, and stick with it. If you do that, in time you’ll be able to turn even a poor credit score into something to be proud of.


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