Content updated 7/2016: Most credit cards for bad credit start out with very low limits, usually around $300 – $500. There are ways to get that amount increased, and here are a few tips to help you achieve that goal.
First, make sure the company you are applying works with consumers with bad credit. Read the requirements the lender gives for approval. If it says good – excellent credit required move on! If it says bad credit ok, or if they are a subprime lender, you have a better chance of getting approved.
- Prove to card issuers that you can really afford it. In the past, when I have a bad credit borrower at my desk, I always tell them its not going to be as easy to get them approved for a loan as their good credit counterpart. I have them collect supporting documents to show that yes, they can afford the payment AND I give a clear explanation for the low credit score. I also include all the steps they have taken to improve their credit. Additional documentation that I ask them for are:
- 3- 6 months recent pay stubs
- if they are self employed I have them bring in 3 – 6 months of bank statements.
- letter of explanation for the low credit score – I tell them to explain it as thoroughly and honestly as they can.
- I have them END the letter with all the steps they have taken to improve their credit score and why they feel this loan isn’t as high risk as their credit score may make the lender believe
How To Apply For A Credit Card Using This Method
If you are applying at the banks location, schedule a time to meet with their credit officer. Show them your current credit report and tell them what you are attempting to do. Give them all the supporting documents that you have gathered and see if they can help you. I know I am always impressed when someone comes in, well dressed, knowledgeable, confident and already financial documentation to prove their point. I give them brownie points, I bet your local bank will too!
If you are applying online. Wait for your approval. When your card comes, call the customer service line on the back and ask for the credit limit increase department. Talk to a rep, tell them you want a credit limit increase and why. Ask them if they would be willing to accept additional information to help make their decision. Some will give you a fax number and some companies may tell you to wait 6 months and call back. This is all dependent on the credit card issuers policy and YOUR credit. If your credit score is really low, a lot of times they will automatically tell you wait 6 months and call back. During that 6 month period, use the time to pay down debt and clean up your credit, and then call them again, with your supporting documentation ready to fax or email over to them.
Does this really work?
Yes, I have to admit this works best with credit unions. When I worked at a credit union, my old branch manager trained me in the above method. Credit Unions really work hard to help their members. Approaching banks like BofA will be more difficult. They have a strict policy and most branch managers don’t have the authority to make a credit decision that falls outside of their strict rules. I think smaller, local banks with ties to their community are better options.
- Be ready to pay a higher interest rate than good credit people, you would be surprised how many people want an A credit rank but have D credit. Be realistic. Not until you prove that you are not a high risk borrower, should you demand a lower interest rate. Actions speak louder than words. If you want a low rate, show them how you are now faithfully paying all your debts on time. It will take several months, if not years to prove your credit worthiness (this depends on your credit). The better your credit is now, the shorter time period before you can look forward to lower interest rates.
- Have a creditworthy co-signer. If you have a close friend, colleague or relative who possesses a good – to excellent credit score, you may be able to ask them to co-sign on a credit card for you. This is one of the fastest ways not only to obtain a credit card with a high credit limit, but it will usually also have a much lower interest rate then if you applied on your own. Even though this is the fastest way, its also one of the HARDEST! You first have to find someone willing to put their financial future on the line for you. If you fail to pay on this card, it becomes the responsibility of the co-signer to pay it for you. Also any late payments will be reflected on their credit report. So their good credit can swiftly turn to bad due to your IRRESPONSIBILITY ! If you can’t make a payment make sure you tell them before the due date and maybe they can make it for you. At that point don’t be surprised if they close the card! There are not a lot of people (outside of your mother) who really want to put their credit on the line for someone else. Don’t take offense if a friend or family member turns you down. A responsible co-signer knows they may be responsible for making the payments and while they have good credit themselves, they may be financially strapped. And the thought of being responsible for someone else credit card payment, maybe too much for them to handle.
At the end of the day, if you want to get a high limit credit card with a decent rate you need to start practicing good credit habits. Make sure you pay your card on time. No excuses, even if one month you can only pay the minimum amount due. Its best to try and pay the card off each month. For a lot of people that is impossible, but don’t max it out, or worse yet go over your limit (massive fee) !
If you practice good credit habits over time you will be able to not just negotiate higher credit limits but also lower interest rates.