Can I get a credit card with poor credit?

While it may be possible to apply for a credit card with a poor credit score, there could be increased risk in doing so and it may be more difficult to get approved compared to someone with a good credit record. We take a look at some things to consider before applying for a credit card with a poor credit score.

If you want a credit card, it could be a wise idea to do you homework before you lodge an application. This is because lending institutions have certain criteria they have to follow by law. Applying for credit cards without checking whether you are eligible in advance may result in your application being rejected. Any rejected applications are typically recorded on your credit history, and a credit record containing multiple rejections could potentially negatively impact your credit score. This, in turn, could make it less likely that any future applications will be approved.

→ You can check your credit score for free

Other factors that could damage your credit score may include:

  • Missing or making late repayments on existing debt
  • Not paying your utility and other household bills on time
  • Applying for riskier forms of credit such as payday loans

These are among the things can impact your final credit score, and may determine which credit score range you fall within. For example, this is how credit score provider Equifax categorises consumers based on their score.

Credit-worthiness Excellent Very Good Good Average Below Average
Score 841 to 1,200 756 to 840 666 to 755 506 to 665 0 to 505

Ultimately, what constitutes a ‘poor’ credit score is for each individual bank or other credit provider to determine, but finding yourself in one of these lower score tiers could result in lenders giving you less favourable terms or declining your application for certain products.

Is applying for a credit card with a poor credit score a good idea?

Before looking into how to get your application approved, it may be worth considering whether getting a credit card is a good idea at all. If you have had difficulty meeting your repayments on other credit ion the past, or you have missed bill payments recently, applying for more credit may make it even more challenging to stay on top of your finances. It could be helpful to create a monthly budget to identify your regular costs and income, and if you find that you are spending more than you are earning, it could be worth looking at ways to reduce your costs rather than applying for credit.

If you’re unsure of what approach is best for your situation, you could seek the help of a financial counsellor who may be able to offer guidance on how to manage your finances.

How to put yourself in the best position when applying for a credit card

If you decide that applying for a credit card is suitable for your situation, here are some factors that lenders may be looking for when it comes to applicants with a poor credit score:

1. Demonstrate a steady income

Under responsible lending regulations, lenders must look at your financial position to make sure you will be in a position to meet your repayments before approving you for a credit card. This generally includes assessing your regular income. Before applying, you may want to think about whether your income will allow you to meet your credit card repayments each month, particularly if you don’t have a regular job or reliable source of income. If your application is rejected, this could negatively impact your credit score.

For those employed as casuals or contractors, it may help if you can 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 could be a red flag for credit card lenders if you already have a poor credit score.

2. Pay off other loans or credit

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

3. Work on improving your credit score

Many lender check your credit score when assessing applications for credit. If you’d like to improve your credit score, it can be worth looking into what black marks you may be able to fix over time, or even an error you could report to the credit bureau for investigation.

Canstar has some tips on how you can improve your credit score, to help get you started.

4. Start saving

Lenders may also request and 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 money 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 at least a small amount each week. This may help to show the lender that you will likely have the means to repay a credit card if they give it to you.

What other products might you be able to get with a poor credit score?

If you’re having trouble being approved for a credit card or if you decide that applying for credit is not in your best interest, there are alternatives out there that could possibly help you meet your financial goals. These products include:

  • Debit cards, which can be a good way to avoid debt altogether by only allowing you to spend money you already have
  • Prepaid cards, that you can pre-load funds onto and don’t charge interest

If you’re currently comparing credit cards, the comparison table below displays some of the low rate credit cards currently available on Canstar’s database for Australians looking to spend around $2,000 per month. Please note that this table features links direct to the providers’ website, and is sorted by Star Rating (highest to lowest), then lowest Purchase Rate, then alphabetically by provider name. Use Canstar’s credit card comparison selector to view a wider range of credit cards.

Image source: kikovic (Shutterstock)

This article was reviewed by our Finance Editor, Sean Callery, before it was published as part of our fact-checking process.

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