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5 Pre-Qualified Credit Cards for Bad Credit (2020)

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Prequalified credit cards for bad credit can help you get a card, improve your credit score, and build your credit history. Without damaging your credit score, prequalification gives you a reasonable idea of whether you’ll be approved for a credit card.

Let’s take a look at five cards that offer applicants the ability to see their chances of approval before submitting an application.

Cards | FAQs | Methodology

The following five cards specialize in providing credit to consumers with less-than-perfect (cardspeak for “bad”) credit. This group is a mix of secured and unsecured cards.

Issuers of secured cards can assume the risk of approving bad credit applicants by requiring a cash deposit, whereas unsecured cards must depend on limiting credit lines and charging one or more fees. All five prequalify applicants to reduce unnecessary hard credit inquiries that can hurt your credit score.

  • No annual fee, and all the credit building benefits with responsible card use
  • Unlike a prepaid card, it builds credit when used responsibly, with regular reporting to the 3 major credit bureaus
  • Access to an authorized bank account is required to make your $49, $99 or $200 refundable security deposit
  • Make the minimum required security deposit and you’ll get an initial credit line of $200. Plus, deposit more money before your account opens to get a higher credit line
  • Get access to a higher credit line after making your first 5 monthly payments on time with no additional deposit needed
  • Easily manage your account 24/7 with online access, by phone or using our mobile app

N/A

N/A

26.99% (Variable)

$0

Limited, Bad

You can prequalify for the Capital One® Secured Mastercard® in about a minute by filling out a short form. Simply fill in your name, address, Social Security number, desired card benefits, and credit level (excellent, average, or rebuilding).

Capital One may then offer you the most appropriate credit cards, including the Capital One® Secured Mastercard®. This card requires a security deposit of between $49 and $200 that gets you a minimum credit line of $200. You can make a larger deposit to secure a higher credit line, up to $1,000. The card charges no annual fee.

BAD CREDIT RATING

★★★★

3.9

  • No Annual Fee, earn cash back, and build your credit with responsible use.
  • It’s a real credit card. You can build a credit history with the three major credit bureaus. Generally, debit and prepaid cards can’t help you build a credit history.
  • Establish your credit line with your tax return by providing a refundable security deposit of at least $200 after being approved. Bank information must be provided when submitting your deposit.
  • Automatic reviews starting at 8 months to see if we can transition you to an unsecured line of credit and return your deposit.
  • Earn 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter. Plus, earn unlimited 1% cash back on all other purchases – automatically.
  • Get 100% U.S. based customer service & get your free Credit Scorecard with your FICO® Credit Score

N/A

10.99% for 6 months

24.49% Variable

$0

New/Rebuilding

The Discover it® Secured card collects prequalification information that includes your name, address, age, Social Security number, job/student status, annual gross income, housing status and payments, and bank accounts. Discover will perform a soft pull of your credit report that won’t hurt your credit. It then may invite you to apply one of its cards, including Discover it® Secured.

The card requires a security deposit of $200 to $2,500 and offers cash back rewards.

BAD CREDIT RATING

★★★★★

4.5

  • Prequalify for a card today and it will not impact your credit score
  • Less than perfect credit is okay
  • Mobile account access at any time
  • Protection from fraud if your card is stolen
  • Account history is reported to the three major credit bureaus in the U.S.

  • *Dependent on credit worthiness

N/A

N/A

24.9%

$35 – $99

Bad, Poor Credit

You may obtain a Milestone® Mastercard® by completing a prequalification form that is almost identical to its application form. The difference is that the issuer performs a soft-pull of your credit report for prequalification and a hard pull for applications.

You’ll provide your name, address, Social Security number, date of birth, and phone number. The application also obtains your monthly income and expenses. If you don’t prequalify for the Milestone® Gold Mastercard®, you may be offered a credit card from another issuer.

BAD CREDIT RATING

★★★★

4.4

  • Pre-qualify for a card today and it will not impact your credit score
  • Less than perfect credit is okay
  • Mobile account access at any time
  • Fraud protection for stolen or lost cards
  • Account history is reported to the three major credit bureaus in the U.S.

N/A

N/A

24.9%

$0 – $99

Bad, Poor Credit

The Indigo® Mastercard® can prequalify you in 60 seconds with no impact on your credit score. Just provide your name, address, date of birth, Social Security number, email address, and phone number on the prequalification form.

Based on your prequalification results, you may be offered to apply for the Indigo® Platinum Mastercard® or a card from another bank. Your credit profile will determine your annual fee.

BAD CREDIT RATING

★★★★

4.3

  • Seeing if you Pre-Qualify is fast, easy, and secure
  • Get 1% cash back rewards on eligible purchase, terms apply
  • Rewards post automatically to your account each month
  • Automatic reviews for credit line increase opportunities
  • With $0 Fraud Liability, you won’t be responsible for unauthorized charges
  • Pick a card that fits your style. Multiple card designs are available, a fee may apply

N/A

N/A

19.49% to 25.49% Variable

$0 – $99

Poor

The Credit One® Unsecured Platinum Visa® provides a prequalification form that collects your name, address, date of birth, Social Security number, monthly income, email address, and phone number. If you prequalify, you’ll fill out an application form for this card or for another offer of credit.

This card is one of two on this list that provides cash back, as well as access to your credit score and report. You may be charged an annual fee.

Secured credit cards are among the easiest to obtain when you have a bad credit score. That’s only natural since you must deposit cash into a special account to collateralize the card’s credit limit.

The card issuer will use your deposit if you miss a payment or go over your credit limit. It’s a win-win proposition, but only if you have the necessary cash available for a deposit.

How to Use a Secured Credit Card

In this review, the Capital One® Secured Mastercard® is our top choice, and it is a secured card. The required security deposit is $49, $99, or $200 for an initial credit limit of $200. The lower deposit requirements are generally not available to applicants with bad credit.

We also like the Discover it® Secured card, which has a minimum deposit and credit line of $200. The maximum credit line, $2,500, is determined by your income and ability to pay. Your credit line must be secured dollar-for-dollar by your deposit.

Prequalification is a good idea for folks with bad credit, as it lets you know in advance whether you should bother to apply for a specific credit card. Prequalification differs from the application process in at least four ways:

  1. The information requested for prequalification is usually a subset of that required for the application.
  2. The issuer performs a soft pull of your credit report for prequalification but does a hard pull when you submit your application. Therefore, prequalification does not hurt your credit score whereas submitting an application may.
  3. Prequalification does not guarantee your subsequent application will be approved.
  4. Many credit cards will offer you alternative cards based upon your prequalification information. This is not necessarily standard practice when you apply for a particular card.

If you prequalify for a card, the issuer may transfer the information to its application form and request any additional information it requires. Even if you are prequalified, you are not under obligation to apply for the card, and the issuer is not required to approve your application.

The five card issuers in this review provide simple prequalification or preapproval forms for you to complete. The typical information requested deals with your identity and residence.

Some issuers will also ask about your gross income and expenses, while others postpone asking for these data items until you fill out the application form.

When you send in your prequalification form, the issuer will use some information from your credit report that it obtains via a soft pull from one of the major credit bureaus. By requesting prequalification, you authorize the issuer obtaining the information it requires from your credit report and other sources.

You can increase your chances of being prequalified by taking a few steps, including disputing errors on your credit reports, making all payments on time, and reducing your current indebtedness. You can get free copies of your three credit reports from AnnualCreditReport.com.

Many card issuers use a preferred credit bureau. For example, Discover uses Equifax about half the time. Knowing this can help you prioritize which credit report you clean up first.

It may seem obvious to some that preapproval would be better than prequalification, but a lot depends on how the card issuer uses these terms. For example, Discover uses the term “preapprove” the way other issuers use “prequalify.”

The truth is that any “pre” word is not to be confused with “approval,” which can come only when you fill out an application form, not a prequalification or preapproval form.

“Preapproval” is also used in another context — when you receive mailed offers for preapproved credit cards. Generally, this means you can enter a special approval code when you fill out the card application form.

Credit One Bank Screenshot

You may receive an approval code you can use to accept a preapproved card offer.

By law, these pre-screened offers must be “firm” and honored if you accept. However, the issuer may review your credit anyway to verify it hasn’t changed since the offer was mailed.

Preapproved offers have some benefits. They use soft inquiries, so you are not penalized when issuers send them out. In addition, these offers may provide you with better product choices, terms, and rates.

Our list of prequalified credit cards for bad credit evaluated the cards designated for credit scores below 579 (the “bad” range under the FICO credit scoring model) that offer prequalification before submitting an official application. This helps prospective applicants get an idea of their chances of approval before undergoing a hard credit pull and possible denial.

CardRates’ reviews undergo a thorough editorial integrity process to ensure that content is not compromised by advertiser influence.



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Fall River Man Charged With Stealing Unemployment Benefits

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BOSTON – Six Massachusetts residents have been charged in federal court with using stolen identities to obtain official IDs and governments benefits, including a Fall River man.

Antonio De Carvalho Vicente, 59, a Brazilian national illegally residing in Fall River, allegedly submitted an application for Pandemic Unemployment Assistance benefits using another person’s name and Social Security number, according to a media release from the office of U.S. Attorney Andrew E. Lelling.

De Carvalho Vicente allegedly received weekly payments of $600 under the PUA program, although the Massachusetts Department of Unemployment Assistance later ceased payments after flagging a suspected identity issue, Lelling’s office said. The release did not say how much money the man allegedly collected.

Last week in Boston, De Carvalho Vicente was charged with theft of government funds. The charge provides for up to 10 years in prison, three years of supervised release, and a fine of $250,000.

Five other defendants, including people from Lawrence, Roxbury, and Roslindale, allegedly used Social Security numbers and other identifiers to obtain, for example, Massachusetts driver’s licenses, Mass Health benefits, and unemployment assistance under the Coronavirus Aid, Relief, and Economic Security Act, Lelling’s office said.

“Identity fraud takes a tremendous toll on its victims,” Lelling said in a statement. “Individuals whose identities have been misused can face difficulties obtaining health care benefits, Social Security benefits or unemployment benefits, and are often left dealing with collateral consequences such as tax liability, bad credit and outstanding arrest warrants in their names. We will continue to hold accountable those engaged in identity fraud.”

Michael Shea, Acting Special Agent in Charge of Homeland Security Investigations in Boston, issued his own statement:

“These arrests mark an important landmark in the fight to ensure that benefits owed to American citizens go to whom they belong and not to those illegally present in our country,” said Shea.  “This is an important enforcement metric reached in the fight against benefit theft crimes, which are especially egregious during today’s these times of serious economic and public health concerns.”

Shea extolled the “tireless, dedicated team work of those partners who make up the Document and Benefit Fraud Task Force” and praised Lelling, the U.S. Attorney for Massachusetts, “whose unprecedented commitment to prosecuting these crimes has never wavered.”

Phillip M. Coyne, Special Agent in Charge at the Office of the Inspector General of the Department of Health and Human Services regional office in Boston, took the opportunity to chime in:

“The Medicaid program is a partnership between the federal government and the states to provide healthcare to some of the most vulnerable members of society,” said Coyne. “Medical identity theft jeopardizes the safety of its victims while disregarding the taxpayers who ultimately bear the cost. We will continue to root out imposters whose actions threaten the integrity of our healthcare system.”

Since July 2018, 50 people have been charged in connection with document, identity and benefit fraud through investigations by Homeland Security’s document and benefit fraud task force, a “specialized investigative group comprising personnel from various state, local and federal agencies with expertise in detecting, deterring and disrupting organizations and individuals involved in various types of document, identity and benefit fraud schemes.”

The task force investigates people who allegedly obtained stolen identities of U.S. citizens living in Puerto Rico to fraudulently obtain documents and public benefits, Lelling’s office said.

Lelling acknowledged a host of partners in the investigations, including police departments in Fall River and Dartmouth.



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Self-Employment, Freelancing, and Auto Loans

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With unemployment hitting record highs this year, we’ve also seen an increase in people becoming self-employed by starting to freelance or picking up a side hustle in an attempt to make extra cash. What does this mean in terms of your ability to take on a car loan, though?

Proving Your Income While Self-Employed or Freelancing

Self-Employment, Freelancing, and Auto LoansOne of the cornerstones of getting approved for an auto loan is proving you have enough income to pay for the vehicle. With a W-2 income (when you work for someone else), this simply means having a recent check stub that proves a monthly income that meets the lender’s minimum requirement, and shows your year-to-date income.

For people who are self-employed or freelancers, this means you have 1099 income (when you work for yourself or you’re a contractor). Some lenders may not accept borrowers that are self-employed, and whether or not they do can depend on your credit score.

Borrowers who are self-employed may need to provide copies of their tax returns to prove their income. However, if you have good credit, a traditional car lender may not ask for these. They may only ask for bank statements or deposit slips as proof of income.

However, expect to need more if your credit is poor.

Proof of Self-Employment Income and Subprime Lenders

For borrowers who are applying with a subprime auto lender for their next car loan due to a lower credit score, proof of income is a big factor. Subprime lenders look for stability in their borrowers outside of their credit score, and this means they typically verify work history and income to determine your ability to take on an auto loan.

If you’re self-employed or a freelancer with bad credit, then expect a subprime lender to ask for two or three years of your tax returns for proof that you can meet the income requirements. Your tax returns also prove that your income is taxed and reported.

Many people wonder if you can use bank statements to prove your income with a subprime lender. Unfortunately, bank statements don’t show that your income is reported, just that it’s deposited in your account, so subprime lenders almost always don’t accept them as proof of income.

Your tax returns can also prove your work history, since it can show a consistent source of income. Many subprime lenders look at your work history going back three years, and they usually require that you’ve been at your current job for at least six months to one year.

While subprime lenders have some stringent requirements for their car loans, it’s all in an effort to make sure that you have the ability, stability, and willingness to handle the loan. Their auto loans are also reported to the credit bureaus, which means there’s a chance for credit repair with timely payments.

If you can’t prove your income or work history with tax returns, then you may have to look into other car lending options.

Self-Employment and BHPH Dealerships

If your credit score is low, you’re self-employed, and your tax returns don’t prove your income, then you’re likely to need a buy here pay here (BHPH) dealership to get into an auto loan.

BHPH dealers have double roles, since they’re also your lender. All the car shopping and financing is done at the same location, so it’s a one-stop-shop experience. The biggest plus to these dealerships is that they usually aren’t concerned with what’s on your credit reports, so a lower credit score wouldn’t come in between you and a vehicle.

These dealers often aren’t as concerned about where your income is coming from, as long as you have enough to prove you can pay for the car. Since BHPH dealerships don’t have to rely on a third-party lender to approve you for financing, they tend to have their own means of verifying income.

Some requirements of a BHPH dealer usually include a down payment and some form of proof of income. On average, BHPH dealerships tend to assign higher than average interest rates on their auto loans, so it’s something to be mindful of. BHPH dealers may not report your car loan to the credit bureaus, so ask about their reporting practices if you’re concerned about credit repair.

Ready to Find a Dealership?

Finding the right lender for your income situation can be a struggle, especially if you’re dealing with credit issues. However, locating the right lender doesn’t have to be a hassle, and we want to help.

Here at Auto Credit Express, we’ve produced a network of dealerships that spans across the country. We match bad credit borrowers to dealers that are signed up lenders that work with unique credit situations. Get started right now by completing our free auto loan request form, and we’ll look for a dealership in your area without any obligation.

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What Is a Line of Credit vs. Credit Card

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Borrowing money is par for the course when you run a small business – emergencies arise and opportunities pop up, and both require quick access to cash. For many small business owners, it’s a toss-up between taking out a line of credit or putting expenses on a credit card. Deciding which funding method makes sense for you depends on your credit score, funding needs and the type of business you’re running.

 

Editor’s note: Looking for the right loan for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

What is a line of credit?

A line of credit is a revolving loan that allows business owners to draw down money as they need it. The money can be used to address business expenses or to bankroll growth. There is no lump sum disbursement with a revolving line of credit, it works like a credit card. You only pay interest on the money you use.

How does a revolving line of credit work?

A revolving line of credit is a business loan that you can continually drawdown and repay. The credit limit on lines of credit typically range from $1,000 to $250,000, although some lenders will go even higher.

A small business line of credit is renewed annually, with interest accruing once you draw down money. Most have a variable interest rate, which means it changes with the prevailing interest rate in the market.

To obtain a line of credit, you and your business undergo a credit review in which your credit history is picked apart. That will determine the interest rate and credit line. In some cases, a personal guarantee is required to win approval for a revolving credit line.

 “Lines of credit are harder to get than a business credit card,” said Ted Rossman an industry analyst at CreditCards.com. “You have to be in business for at least three years and have at least $250,000 in annual revenue. Some online lenders lower the threshold.”

What are the types of lines of credit to consider?

There are two main types of business lines of credit: secured and unsecured.

  • Secured lines of credit require the business owner to offer collateral. If the debt goes unpaid the lender gets the piece of equipment or real estate. Secured lines of credit tend to have higher limits and lower interest rates because you have skin in the game. Secured lines of credit are required for funding of more than $100,000.
  • Unsecured lines of credit don’t require you to pledge collateral, but you may have to sign a personal guarantee. That means if your business doesn’t pay back the money, the bank or lender can come after your personal assets. Unsecured lines of credit tend to have lower limits and higher interest rates. Many unsecured credit lines have a credit limit from $10,000 to $100,000.

“A personal guarantee can be required if your business doesn’t have paperwork or you’re a sole proprietor,” said Michael Levin, a professor at Otterbein University. “They want proof you can pay the loan back.”

When should you choose a line of credit?

There are several reasons why a business owner would want to use a line of credit, including these four scenarios.

  1. Fund growth: Business owners in growth mode can benefit from a business line of credit. It can be used to purchase new equipment, launch a marketing campaign, or otherwise grow your enterprise. “If you are expanding your business or entering a new market a business line of credit makes sense,” said Levin.
  2. Fill cash-flow gaps: Many small businesses don’t get paid on the spot for their services. Sometimes it can take sixty to ninety days. That can negatively impact cash flow. A line of credit can be used to fill any gaps while you await payment.
  3. Peace of mind: Unexpected emergencies and expenses is part of running a business. If you aren’t prepared, it could spell your business’s demise. A line of credit is insurance against that, acting as a cushion when you need cash.
  4. Builds your business credit rating: If you maintain your line of credit, it will be reflected in your business credit score. The higher that is, the lower the cost of future borrowing.

How do I get a line of credit?

Business owners have options when applying for a line of credit. Banks and credit unions offer business lines of credit, as do credit card issuers and online lenders. It’s important to shop around since the interest rate will vary from one lender to the next. Levin said to start with your existing financial institution and take it from there. They already have a relationship with you and may offer deals if you have a business banking account.

Online lenders are another option. They tend to be more lenient than banks in approving borrowers, but the interest rate may be higher.

“A general rule of thumb: for banks, you have to be in business for three years and have $250,000 in annual revenue; for online players, it’s one year and $100,000,” said Rossman.

What is a business credit card?

A business credit card is also a revolving line of credit that can be used to make purchases. Credit cardholders pay annual interest and fees, otherwise known as the annual percentage rate (APR). Many business credit cards have rewards and loyalty programs that give you cash back and/or points on purchases.

How does a business credit card work?

Business credit cards act the same way that personal credit cards do. You use them for purchases online and in stores and are required to pay a monthly balance. If you don’t pay the entire amount, it carries over to the next pay period and interest is tacked on. Credit card debt can get expensive, particularly if the APR is high. Also, some credit card issuers charge an annual fee.

Business credit card issuers look at your personal and business credit scores when approving you for credit. If you have a high credit score, you’ll get a lower interest rate on your card than someone with a poor credit score. If you default on your credit card it will have a negative impact on your personal credit score and standing.

Business credit cards have a lot of perks if you use them responsibly. To get your business, credit card companies will lure you with generous rewards and bonuses. They know businesses tend to spend a lot of money each month and they will go to great lengths to win your business. Most offer 0% introductory APR, sign-up bonus, and generous cashback or point on purchases.

When should you choose a business credit card?

Business credit cards can be very useful for business owners, granted they are paying off the balance each month and avoid racking up credit card debt. Here’s a look at three of the big reasons why you may want to use a business credit card.

  1. Rewards you for purchases: A big perk of using a business credit card for purchases is the rewards. From cashback to free flights, business owners can rack up serious cash and rewards with a credit card.
  2. Prevents comingling of accounts: Having a business credit card helps you keep business and personal expenses separate. Whether you’re just starting out or have been in business for years, best practice is to have a separate business and personal checking account. This applies to credit cards too. Having a business credit card helps you keep your expenses separate and also makes it easier to track them.
  3. Builds your business credit score: Just like a line of credit a business credit card can help you establish or build your credit score. If you use the card responsibly, your rating with the credit rating bureaus will increase over time. That will make it easier and cheaper to borrow money the next time around. A lower monthly payment on future credit card debt is welcome news to business owners.

Line of credit vs credit card: which should you choose?

There are several differences between lines of credit and business credit cards. Which one makes sense for you depends on your credit standing, funding needs and business type. Consider the following four questions.

  • Which can you qualify for? Business credit lines are harder to get than business credit cards, requiring you to have an established operation. According to Rossman, the interest rate on both products are in similar ranges, although you may pay more with a credit card depending on your credit score. If you and/or your business don’t have stellar credit, you have a better chance of getting approved for a business credit card than credit line. [Read related article: How to Apply for a Business Credit Card if You Have Bad Credit]
  • How established is your business? If you are a sole proprietor or a new business owner who doesn’t yet have any financial documentation for your business, a credit card is the better choice. Typically, with a business line of credit, lenders require you to have one to three years in business and $100,000 to $250,000 in annual sales.
  • How do you plan to use it? If you need money to make a large one-time purchase or for small expenses like office supplies, a business credit card makes more sense. If it’s for large recurring expenses like inventory purchases, emergencies or to fund growth, a credit line is a better option.
  • Do you travel or make a lot of small purchases for your business? If you travel a lot for business or have a lot of small, regular purchases, a business credit card may be the better option because you can rack up a lot of miles and/or cashback rewards, granted you pay your balance each month.

“It depends on the type of business you have. If you do a lot of traveling as part of your business than a business credit card makes sense,” said Levin. “If you are trying to structurally increase your business, a business line of credit makes more sense.”

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