Can I get a credit card with poor credit?

Having a poor credit score doesn’t have to be all doom and gloom – you can still potentially apply for certain credit cards. 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 first – 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 by banks and credit institutions. 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.

Some other factors that could affect your chances may be:

  • 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, and may determine your credit range. For example, if you check your credit score with Equifax, your level of credit-worthiness is separated into the following bands:

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
Source: Equifax.com.au 

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.

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 Key Facts Sheet 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 provider name (alphabetically).

How to put yourself in the best position

Here are some of the lending tips that may be relevant 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. You may want to think about whether you will be able to repay your card in full each month before applying, particularly if you don’t have a regular job or reliable source of income. If you are rejected, this could negatively impact your credit score.

So 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 is unlikely 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 partly on your repayment history with cards or loans you already have. You may need to 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.

If you’d like to check your own, you can get a free credit score from Canstar.

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

4. Start saving

Lenders may also 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, 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, meaning cards that come with funds pre-loaded and don’t charge interest

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:

Follow Canstar on Facebook and Twitter for regular financial updates.

Image source: kikovic (Shutterstock)

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