Best credit cards for bad credit in January 2023

If you have a low credit score, you may be surprised to learn that getting a new credit card could actually help. If you’re able to get approved for a new card despite having bad credit, you’ll have the chance to build better credit habits and creditworthiness with responsible use. Not only that, but adding a new card can improve your credit utilization ratio and your credit score if you’re already in debt.

Unfortunately, credit card options for people with bad credit tend to have few benefits. For instance, you generally won’t get a welcome bonus with these types of cards, and they usually charge fees, such as annual fees and foreign transaction fees. Credit cards for bad credit can also come with high interest rates, which can make carrying a balance a costly endeavor.

But with all that said, it’s important to understand that some credit cards for bad credit are considerably better than others. So let’s take a look at the types of credit cards you may be eligible for in January 2023 with poor credit, as well as how you can use them to your advantage.

Click here to see the latest list of the best credit cards for people with bad credit scores.

If you have bad credit, you’re probably already aware of it. After all, a poor credit score typically means you’ve been denied for a credit card or other loans in the past because a lender felt you were too much of a financial risk. You likely also know the reason you have poor credit to begin with, whether it’s because you let a loan or credit card fall into default, had an account go to collections or have a bankruptcy on your record.

But even if that’s the case, it never hurts to check your credit score so you know exactly where you stand. Fortunately, there are quite a few ways to check your credit score for free.

You can start by signing up for a credit monitoring service that provides a free credit score, or for a program that offers free credit tracking tools. For example, Experian Boost gives consumers a free look at their FICO credit score, and it can even help you improve your score quickly.

As you work on your credit score, you’ll probably want to pay the most attention to your FICO credit score, since it’s the most commonly used scoring model. FICO credit scores range from 300 to 850 and are broken down into the following tiers:

While truly “poor” credit is a FICO score of 580 or less, “fair” credit between 580 and 669 is still below average when compared to other US consumers. If your credit score falls in either of these categories, you should take steps to improve it as quickly as you can.

See if you qualify for one of these credit cards for people with fair credit.

If you have poor credit, there are two different types of credit cards you can qualify for — secured credit cards and unsecured credit cards.

Secured credit cards are typically the easiest to get if you have bad credit. However, secured credit cards require a cash deposit to get started. This means you may be required to put down $200, $500 or more as collateral, and you’ll typically get a low credit limit that’s equal or close to your deposit.

The biggest benefit of secured credit cards is that they’re typically reported to the major credit bureaus. This means all your on-time payments get added to your credit report, which can help boost your credit over time. And even though you have to put down a cash deposit to open a secured card, if you later close the account or upgrade in good standing and with a $0 balance, your deposit will be refunded.

Save money with these best credit card offers for people with poor credit scores.

In addition to secured credit cards, you may also be able to qualify for an unsecured credit card with bad credit. These cards tend to come with fees, low credit limits and few benefits, but they can help you build credit just the same.

Store credit cards are also a type of unsecured credit card that can be easier for people with bad credit to be approved for, since they generally can only be used at the store or chain that issues the card.

Aside from it being easier to get approved, the biggest advantage of store credit cards is that if you find yourself often shopping at a particular retailer, you might be able to save some money, whether it’s on your initial purchase or down the road on a future shopping trip. Typically, using a store credit card saves you 5% on your purchase, and store credit cards can also come with other benefits you may not have thought about.

Before you get a new credit card in 2023, you should make sure you have a clear understanding of what you hope to accomplish. While getting a credit card gives you the chance to improve your credit, you could make your credit worse if you’re not ready for the responsibility. So before you apply, ask yourself these questions:

The best credit cards for poor credit may not seem very attractive, but the goal is to use them to boost your credit score so you can qualify for better offers later on. But there are a few “gotchas” to be aware of and watch out for, including:

Compare available credit card offers for people with fair credit.

If your goal in 2023 is to get a new credit card to help rebuild your credit, you need to know and understand how your credit score is determined in the first place. Let’s take a closer look at the five factors that make up your FICO credit score:

As you look at these factors, it’s easy to see what your next steps should be. Most importantly, you should strive to pay your credit card bill — and all your other bills — on time every month. Also, you should keep your debt to a minimum since the amount you owe in relation to your credit limits makes up 30% of your FICO score, which is also known as your “credit utilization ratio.”

Since any credit card you get with bad credit will likely have a low credit limit to begin with, you’ll need to be especially careful not to max out your credit limit, and to pay off your balance as much as possible each month to keep your credit utilization ratio low.

The length of your credit history can also be boosted if you keep older credit accounts open and in good standing, and you can keep your score high in the “new credit” category by refraining from opening too many new accounts.

Your credit mix is a final category to keep in mind, but you may not have too many different types of credit — such as installment loans like a mortgage or car loan — when your credit score is fair or poor. Once you improve your credit score, you can worry more about diversifying your credit with installment loans, revolving accounts and other types of credit.

In the end, if you’re going to get a new credit card in an effort to improve your bad credit, you need to make sure that you don’t make the same mistakes that caused you to have a problem in the first place. So if you decide to apply for a new credit card, be smart about how you use it. Don’t overspend, don’t pay your bills late and avoid cards that charge high fees so you can get back on the road to good credit.

Learn more and apply now for the best credit cards you can get with a bad credit score.

Is your credit score good or excellent? Or maybe you don’t have any credit at all? CNN Underscored has you covered with our other stories in this series:

Check out CNN Underscored’s list of the best credit cards currently available.

Get all the latest personal finance deals, news and advice at CNN Underscored Money.