Can I get a credit card with poor credit?

We explain how to apply for a credit card with a poor credit score – without being rejected by the banks and hurting your credit score further.

Having a poor credit score can have potential consequences on your financial options  – it might make it more difficult to obtain a loan or credit card in the future. But having a poor credit score doesn’t have to be all doom and gloom. You can still apply for a credit card, and there are still reputable lenders out there that may consider your application. Of course, you have to do your homework first before applying, and provide a lender with good reasons to give you a line of credit.

The table below displays a snapshot of 4-Star and above low rate credit cards on Canstar’s database, with links to providers’ websites. Before applying for a particular credit card product, check upfront with the provider and read the PDS to get a better idea of your eligibility for the card, and what the applicable rates and fees will be. The products displayed are based on a monthly spend of $2,000. Results are sorted by Star Rating (highest to lowest) then by proivder name (alphabetically). 

Errors to avoid

If you keep applying for credit cards without doing your homework first and being sure you are eligible, you may continue to be rejected by banks and credit institutions. Lending institutions have lending criteria that they have to follow by law – so they can’t give you a credit card unless you meet those criteria. Applying for credit cards and being rejected by banks and lenders too often is just one thing that contributes negatively to your credit score, as well as:

  • Making late repayments
  • Not making repayments at all
  • Not repaying your balance transfer by the end of the promotional interest period
  • Getting multiple balance transfer credit cards in quick succession

All these things can impact your final credit score, which is separated into the following bands (if you choose to get your credit score from Equifax):

Credit-worthiness Excellent Very Good Good Average Below Average
Score 833 – 1,200 726 – 832 622 – 725 510 – 621 0 – 509
Source: Equifax.com.au 

What constitutes a ‘poor’ credit score is for the bank to determine, but finding yourself in these lower score tiers could result in lenders giving you less favourable terms or declining your application for certain products.

How to put yourself in the best position

Here are the typical lending criteria that may apply when you apply for a credit card and you have a poor credit score:

1. Have a steady source of income

A lending institution is not legally allowed to give you a credit card unless you have enough annual income to meet the minimum repayments for that card’s credit limit. And you should think twice before applying for a credit card if you can’t afford to repay your card in full each month, anyway – you might be better off using a debit card.

If you don’t have a regular job or reliable source of income, you may want to reconsider applying for a credit card. If you are rejected, this could negatively impact your credit report.

How much work is enough? For those employed as casuals or contractors, you may need to demonstrate a long-standing working relationship of more than 12 months with your current employer. Having more than one employer in a short span of time doesn’t trend to help you get a credit card if you already have a poor credit score, because most lenders are looking for one or two stable sources of income to repay the card.

2. Pay off other loans or credit

Lenders usually approve credit cards (or other types of loans) based on your repayment history with cards or loans you already have. You will need to demonstrate a consistent history of meeting your required monthly repayments over the past months. For credit cards, you will often need to show that you’ve been making more than just the minimum monthly repayment, to show that you can actually repay the debt.

You can check your credit rating and your credit history report for free (once a year) with EquifaxDun & Bradstreet (CheckYourCredit.com.au), or Experian Credit Services. Read this article to find out more on how to do it.

3. Work on improving your credit report

If you’d like to improve your credit score, it can be worth looking into what black marks you may be able to fix. You never know what it might uncover – an unpaid phone bill you can afford to repay now, or even an administrative error you could report to the credit bureau for investigation.

Canstar has an in-depth article on how you can improve your credit score.

4. Start saving

Lenders may consider your current bank statements when you apply for a credit card with a poor credit rating. If you’ve overdrawn your account recently, or if any direct debits have been dishonoured because there wasn’t enough in your account at the time, this may work against you.

It’s important to show you are not spending all your income on your expenses and other debts, and that you are saving a small amount each week. This helps to show the lender that you will likely have the means to repay a credit card if they give it to you.

Compare Low Rate Credit Cards

What other products can you get with a poor credit score?

If you’re having trouble being approved for a credit card, there are alternatives out there that may help you meet your financial goals. These products include:

  • Travel money cards, which allow you to load currencies ahead of time if you’re travelling overseas (an alternative to travel credit cards)
  • Debit cards, which can be a good way to avoid debt all-together by only allowing you to spend money you already have
  • Prepaid cards – cards that come with funds pre-loaded and don’t charge interest
  • Poor credit personal and home loans, which don’t take your credit history into account but may come with stricter lending requirements and other factors that should be closely considered

If, after doing your homework and determining your eligibility, you do decide to apply for a credit card, you can compare what’s available with Canstar:

Compare Credit Cards with Canstar

Image source: kikovic (Shutterstock)

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