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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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Bad Credit

How to Avoid a Prepayment Penalty When Paying Off a Loan | Pennyhoarder

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Look at you, so responsible. You received a financial windfall — stimulus check, tax refund, work bonus, inheritance, whatever — and you’re using it to pay off one of your debts years ahead of schedule.

Good for you! Except… make sure you don’t get charged a prepayment penalty.

Now wait just a minute, you say. I’m paying the money back early — early! — and my lender thanks me by charging me a fee?

Well, in some cases, yes.

A prepayment penalty is a fee lenders use to recoup the money they’ll lose when you’re no longer paying interest on the loan. That interest is how they make their money.

But you can avoid the trap — or at least a big payout if you’ve already signed the loan contract. We’ll explain.

What Is a Loan Prepayment Penalty?

A prepayment penalty is a fee lenders charge if you pay off all or part of your loan early.

Typically, a prepayment penalty only applies if you pay off the entire balance – for example, because you sold your car or are refinancing your mortgage – within a specific timeframe (usually within three years of when you accepted the loan).

In some cases, a prepayment penalty could apply if you pay off a large amount of your loan all at once.

Prepayment penalties do not normally apply if you pay extra principal in small chunks at a time, but it’s always a good idea to double check with the lender and your loan agreement.

What Loans Have Prepayment Penalties?

Most loans do not include a prepayment penalty. They are typically applied to larger loans, like mortgages and sometimes auto loans — although personal loans can also include this sneaky fee.

Credit unions and banks are your best options for avoiding loans that include prepayment penalties, according to Charles Gallagher, a consumer law attorney in St. Petersburg, Florida.

Unfortunately, if you have bad credit and can’t get a loan from traditional lenders, private loan alternatives are the most likely to include the prepayment penalty.

Pro Tip

If your loan includes a prepayment penalty, the contract should state the time period when it may be imposed, the maximum penalty and the lender’s contact information.

”The more opportunistic and less fair lenders would be the ones who would probably be assessing [prepayment penalties] as part of their loan terms,” he said, “I wouldn’t say loan sharking… but you have to search down the list for a less preferable lender.”

Prepayment Penalties for Mortgages

Although you’ll find prepayment penalties in auto and personal loans, a more common place to find them is in home loans. Why? Because a lender who agrees to a 30-year mortgage term is banking on earning years worth of interest to make money off the amount it’s loaning you.

That prepayment penalty can apply if you want to pay off your loan early, sell your house or even refinance, depending on the terms of your mortgage.

However, if there is a prepayment penalty in the contract for a more recent mortgage, there are rules about how long it can be in effect and how much you can owe.

The Consumer Financial Protection Bureau ruled that for mortgages made after Jan. 10, 2014, the maximum prepayment penalty a lender can charge is 2% of the loan balance. And prepayment penalties are only allowed in mortgages if all of the following are true:

  1. The loan has a fixed interest rate.
  2. The loan is considered a “qualified mortgage” (meaning it can’t have features like negative amortization or interest-only payments).
  3. The loan’s annual percentage rate can’t be higher than the Average Prime Offer Rate (also known as a higher-priced mortgage).

So suppose you bought a house last year and then wanted to sell your home. If your mortgage meets all of the above criteria and has a prepayment penalty clause in the mortgage contract, you could end up paying a penalty of 2% on the remaining balance — for a loan you still owe $200,000 on, that comes out to an extra $4,000.

Prepayment penalties apply for only the first few years of a mortgage — the CFPB’s rule allows for a maximum of three years. But again, check your mortgage agreement for your exact terms.

The prepayment penalty won’t apply to FHA, VA or USDA loans but can apply to conventional mortgages — although the penalty is much less common than it was before the CFPB’s ruling.

“It’s more of private loans — loans for people who’ve maybe had some struggles and can’t qualify for a Fannie or Freddie loan,” Gallagher said. “That block of lending is the one going to be most hit by this.”

How to Find Out If a Loan Will Have a Prepayment Penalty

The best way to avoid a prepayment penalty is to read your contract — or better yet, have a professional (like an attorney or CPA) who understands the terminology, review it.

“You should read the entirety of the loan, as painful as that sounds, because lenders may try to hide it,” Gallagher said. “Generally, it would be under repayment terms or the language that deals with the payoff of the loan or selling your house.”

Gallagher rattled off a list of alternative terms a lender could use in the contract, including:

  • Sale before a certain timeframe.
  • Refinance before a term.
  • Prepayment prior to maturity.

“They avoid using the word ‘penalty,’ obviously, because that would give a reader of the note, mortgage or the loan some alarm,” he said.

If you’re negotiating the terms — as say, with an auto loan — don’t let a salesperson try to pressure you into signing a contract without agreeing to a simple interest contract with no prepayment penalty. Better yet, start by applying for a pre-approved auto loan so you can get a pro to review any contracts before you sign.

Pro Tip

Do you have less-than-sterling credit? Watch out for pre-computed loans, in which interest is front-loaded, ensuring the lender collects more in interest no matter how quickly you pay off the loan.

If your lender presents you with a contract that includes a prepayment penalty, request a loan that does not include a prepayment penalty. The new contract may have other terms that make that loan less advantageous (like a higher interest rate), but you’ll at least be able to compare your options.

How Can You Find Out if Your Current Loan Has a Prepayment Penalty?

If a loan has a prepayment penalty, the servicer must include information about the penalty on either your monthly statement or in your loan coupon book (the slips of paper you send with your payment every month).

You can also ask your lender about the terms regarding your penalty by calling the number on your monthly billing statement or read the documents you signed when you closed the loan — look for the same terms mentioned above.

What to Do if You’re Stuck in a Loan With Prepayment Penalty

If you do discover that your loan includes a prepayment penalty, you still have some options.

First, check your contract.

If you’ll incur a fee for paying off your loan early within the first few years, consider holding onto the money until the penalty period expires.

Pro Tip

If you don’t have a loan with a prepayment penalty, contact your lender before sending additional money to ensure your payment is going toward principal — not interest or fees.

Additionally, although you may get socked with a penalty for paying off the loan balance early, it’s likely you can still make extra payments toward the balance. Review your contract or ask your lender what amount will trigger the penalty, Gallagher said.

If you’re paying off multiple types of debt, consider paying off the accounts that do not trigger prepayment penalties — credit cards and federal student loans don’t charge prepayment penalties.

Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.

This was originally published on The Penny Hoarder, a personal finance website that empowers millions of readers nationwide to make smart decisions with their money through actionable and inspirational advice, and resources about how to make, save and manage money.

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10 things you didn’t know will help you get a mortgage

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Anyone who wants to apply for a mortgage right now will know that it’s not easy. Coronavirus has made the process of applying longer, while lenders are now more careful than ever about who they will lend to. You probably already know that having a healthy credit score is essential to a successful mortgage application, but how can it be achieved? Personal finance experts from Ocean Finance  weigh in with the top tips for making sure your application is a success – that you may not have heard about. 

1. Make sure your name is on all household bills

If you share a rental, it can be tempting to let someone else put their name down on the utility bills and just pay them back. If you want a mortgage, avoid doing this: bills with your name and address on them are proof that you pay them on time. This especially applies to the rent itself – never move into a house share without your name being on the contract. Before applying for a mortgage, ask your landlord for a letter confirming that you pay on time. 

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How Can I Prequalify for a Personal Loan? A Guide

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When you are in need of money quickly, you very likely don’t want to sit around pondering a bunch of different options. You want to find the option that works best for you and utilise it. Unfortunately for so many people around the country, it can be difficult to get their hands on the money they need due to them having a bad credit score, or even no credit score at all.

How Can I Prequalify for a Personal Loan?

Photo, Varun Gaba.

Your credit score is thought of as being pretty important, as it shows your financial trustworthiness to financial institutions like banks, credit card companies, lenders, and more. Your credit score is one thing that will usually be considered by just about any company you apply for a loan through, so keeping a close eye on your credit score is imperative for your financial life.

No matter what your credit score looks like, knowing how you can prequalify for a personal loan can be a comforting feeling when you are in need of quick cash. After all, when you are eligible for personal loan prequalification, you feel a little better going into the loan process knowing you won’t have to wait around for a loan decision.

How is Pre-qualification Decided? Prequalifying for a personal loan can depend on several different factors that you will have to keep in mind, and it will vary greatly depending on the lender you are applying through. Here are two of the things you will need to keep in mind when it comes to your loan that could affect whether or not you prequalify for the loan.

— Your credit score; Yes, this is always going to be something you are going to need to think about. Depending on the financial institution or lender you are going through, you can bet that your credit history and score will play a huge part in whether or not you prequalify.

— The amount of your loan; How much money you plan on borrowing from the lender or bank is also going to play a part in deciding whether or not you prequalify.

To get the most out of your search for a lender that you could prequalify with, think about applying with more than just one lender. This way, you might get several pre-qualification offers, and this will allow you to sort through the lenders and decide which one works best for you.

How Can I Prequalify for a Personal Loan?

Photo, Christina @ wocintechchat.com.

The Pre-qualification Process: No matter where you are trying to prequalify for your loan through, you will find the process to be pretty simple and largely similar across most lending platforms. You will need to provide some information to the lender that will help them decide whether or not to prequalify you.

How Can I Prequalify for a Personal Loan?

Photo, Windows.

Some of the information you will need to provide includes:

— Your full name; You will want to make sure you provide your full legal name so you can make the process simple for yourself and the lender. Depending on the lender, you might also be asked to provide images of your government issued ID or driver’s license to validate your identity.

— Your income and information on your job; Your income and employment status are often considered over your credit score when it comes to pre-qualification for loans, especially if you are applying for a personal loan through a lender who deals with customers with bad credit or no credit.

— The loan amount you want; Of course, you will have to include the amount of money you would like to borrow. Make sure it is something reasonable, and something that you can realistically pay back on time.

What Will the Lender Do? If you are trying to prequalify through a lender who specialises in bad credit clients, then you won’t have to worry about your credit score being negatively affected by taking out your loan. However, if the lender reports to the credit bureaus, your payments could still make an impact on your credit score.

If not working with a specialised lender, you might find that the lender will do a soft inquiry on your credit when going through the pre-qualification process. No worries here, as this doesn’t put any dents in your score. If you prequalify for the loan you are looking for, you should get an alert via email from the lender of your choice.

The Money You Need: Hopefully, you will have prequalified for the loan you are looking for so you can ensure you have access to the money you need, when you need it. Whether you’re going through some unexpected circumstance in life or just need money to pay something off quickly, knowing you are prequalified for the loan you need is a comforting feeling, allowing you access to the cash you need for whatever you need it for.



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