Sometimes, we choose poorly. Life doesn’t always go as planned and every once in a while, we find ourselves in difficult circumstances. Sometimes it is because we didn't understand the consequences of the product or service. Sometimes we knew better, and did something irresponsible anyway and sometimes the stress of a difficult situation can simply cause us to exhibit poor judgment. It happens to everyone and at some point in our lives, we’ve all made bad choices about our careers, our personal lives and our finances.
Unfortunately, making poor choices with your credit can create a really big hole that can be very difficult to dig out of. The good news is that if you have made some bad choices with your credit in the past, such as missing payments or defaulting on your balance, all is not lost.
Even with bad credit decisions in your history, you may still be able to get credit. But before you begin researching and evaluating the options for individuals with less than perfect credit, you need to be sure that you are in a financially stable place. That means that you have a steady stream of income from a job or business income and that you have worked out a reasonable budget so that you know exactly how much you can afford to charge on your account every month. Because you are trying to repair your credit and get your financial life back on track, you should really be paying off the card balance every month. If you are carrying a balance and only paying the minimum, you are risking finding yourself in an even deeper credit hole.
Also, if those poor credit decisions are recent and you’re not in a financially stable place, credit counseling would probably be a better option to explore than looking into credit card options.
Once you have the stability of a job or income and a budget, you’re ready to research credit card choices and options. The most important dimension to consider is if the credit card is secured or if it is unsecured.
With a secured card, you are required to make a deposit up front and then you can use the card for credit with a credit limit typically set at a level up to that amount you put down as a deposit.
You get the convenience of a credit card and it’s low risk for the bank or credit card company since they’ve taken a deposit from you.
With an unsecured card, you typically pay much higher fees and interest rates. Every family situation is unique, but unsecured cards with high fees are typically so costly that they just aren’t worth it and you’re better off with a secured card. For that reason, I do not typically recommend high fee unsecured cards for individuals and families trying to repair their credit.
So, let’s look at some specific options for secured cards:
1. Navy Federal Credit Union nRewards Secured Credit Card
First, if you are presently or if have you ever been affiliated in any way with the Armed Forces, DoD, Coast Guard or National Guard, you may qualify for a Navy Federal Credit Union nRewards® Secured Credit Card
This card is a solid choice. There is no annual fee, the APR is reasonable, there is a modest rewards plan and there are no foreign transaction fees, which is a feature that many standard credit cards don’t offer. There is a similar card offered by USAA, with similar military membership restrictions, but the card from Navy Federal has slightly favorable costs and rates.
Credit Union nRewards Secured Credit CardGet rewarded by earning one point per dollar you spend.
2. Discover It Secured Credit Card
A great option for anyone that doesn’t qualify for those cards is the Discover it® Secured Credit Card.
Now, the APR is higher with this card, currently in the low 20s, but since you are using this card as a convenience to repair your credit, you shouldn’t be carrying a balance, so that element shouldn’t be a huge detractor. On the positive side, there is no annual fee, the deposit minimum is lower than the Navy Federal card and you can participate in the Discover cash back program. This card even has a modest match program and you can monitor your FICO credit score on your statement or on their mobile app.
They also appear to be pretty good at “graduating” customers to an unsecured card once they have demonstrated responsible credit management. If they do, you get your deposit back from the secured card and move onto more traditional credit card features and benefits.
It Secured Credit CardCan help you build or rebuild credit with responsible use.
3. Capital One QuicksilverOne Cash Rewards Credit Card
Once you’ve established your credit with your secured card and are ready to move to an unsecured card or if you’re not happy with your secured card and you’d like to see if you qualify, the Capital One® QuicksilverOne® Cash Rewards Credit Card is an option to consider.
There is a $39 annual fee, but they do accept customers with fair credit, they offer 1.5% cash back on all purchases, they offer access to your credit score and they offer higher credit limits when you charge responsibly.
QuicksilverOne Cash Rewards Credit CardGet unlimited 1.5% cash back on every purchase.
4. BankAmericard Travel RewardsCredit Card
If you have been very good with your credit on a secured card and want to try and upgrade to a travel rewards program, you might try the BankAmericard Travel Rewards® Credit Card.
It’s harder to qualify for, but if your credit history is OK or you’ve been very responsible for 8-12 months on a secured card, this card may be worth looking into. This card has no annual fee and the travel rewards are a nice perk with an extra kicker for Bank of America Customers and for making purchases to a certain threshold.
Travel RewardsCredit CardIntroductory 0%† APR for your first 12 billing cycles for purchases.
What Else Can I Do?
In addition to these opportunities, there are often programs at local credit unions that are available to individuals in specific geographic communities or that are affiliated with certain groups or companies. It’s worthwhile to check out your local credit unions to see what offers they might have available and if their local services or fees might be better than the options profiled here.
So, bottom line, start with a secured card and remember to make smart choices this time around because your pathway back to an awesome credit score is going to be harder and slower than the decisions that put a dent in it to begin with. So be patient, be smart and you’ll be more and more credit worthy every day.