Credit Cards For Bad Credit

Verified by David Boyd   |   Updated 15 May 2024

While it's not entirely impossible to secure credit card approval with a poor credit history in Australia, the process can be quite challenging.

For those with bad credit who are considering applying for a credit card, continue reading to discover strategies to enhance your approval prospects and gain additional insights.

Key takeaways

  • While getting approved for a credit card with bad credit in Australia is not impossible, it can be quite challenging.
  • Guaranteed approval is unavailable, as each lender has their own standards for classifying bad credit.
  • To increase your likelihood of approval, pay off debts on time and monitor your credit utilisation ratio.
  • Unlike other countries, secured credit cards are not currently offered in the Australian market.

If your credit score is poor, as determined by checking your credit report, it's essential to carefully consider your options before submitting a credit card application. A rejected application will be recorded on your credit report, potentially making it more challenging to secure approval for credit products in the future.

Can people with bad credit get a credit card?

Yes, getting a credit card with bad credit in Australia is possible. However, the approval process is more challenging.

Even if your application is approved, the credit terms associated with the card are likely less favourable than those offered to individuals with good credit. For instance, the maximum credit limit granted may be significantly lower.

Can you apply for a credit card without a credit check?

No. Credit card issuers in Australia are legally obligated to conduct a credit check.

Features of credit cards for people with bad credit

In Australia, people with bad credit are typically offered credit cards with lower credit limits than customers with good credit scores. The interest rate may also be higher. Cards that approve applicants with bad credit are unlikely to provide additional perks or benefits, such as rewards programs or airport lounge access.

However, when used responsibly, a credit card can help improve your credit score and potentially qualify you for better cards or loans in the future.

How to apply for a credit card when you have bad credit

If you have a bad credit score and are looking for a credit card, there are several steps you can take to increase your chances of approval.

Consider the following tips:

  • Don't rush the process. If possible, focus on improving your financial profile before applying.
  • Make timely debt payments before applying. Lenders will assess your repayment history on any existing cards or loans. Consistently meeting your repayments and paying more than the minimum monthly amount on open credit card accounts may improve your approval odds.
  • Lower your credit utilisation ratio. Banks often consider applicants who use a significant portion of their available credit high risk. Aim to reduce your balance before applying for a credit card. Ensure this is reflected on your most recent credit report (there may be a reporting delay).
  • Establish an emergency fund. Having some savings set aside reduces the likelihood of missing a payment leading up to your application. Additionally, having some money saved may lower your perceived risk profile.
  • If available, perform a soft check before applying. Assess your approval chances before submitting an application to avoid damaging your credit score, as soft checks do not impact your credit history. This allows you to apply for credit cards that better align with your financial situation. Unfortunately, this option is not widely available in Australia.
  • Avoid reapplying immediately after a rejection. Resist the temptation, as it will only worsen your situation.

Pros and cons

Pros

  • Improve your credit score over time. By consistently making timely payments and keeping your credit utilisation ratio low, you can gradually rebuild your credit score.
  • Pave the way for better card options in the future. Responsible credit card use and an improved credit score can help you qualify for more attractive credit cards down the line.

Cons

  • Reduced credit limits. If your application is approved, you'll likely be granted a low credit limit. Refrain from carrying a balance, as it will increase your credit utilisation, keeping your credit score low.
  • Less favorable interest rates and no additional benefits. While your credit is poor, you won't qualify for the most attractive credit card offers, leaving you with a limited selection of basic credit cards.
  • Rejection can hinder your progress. If a bank decides not to approve your application, this decision is recorded in your credit report, visible to other financial institutions.

Alternatives

If you've already been denied a credit card or are hesitant to apply for one due to the potential risk but still require access to financial resources, alternative options are available.

  • Buy now, pay later services. Some providers, such as Afterpay, do not conduct credit checks. However, it's important to note that certain services may still perform a credit check.
  • Personal loans. It is possible to secure a personal loan even with a poor credit history.
  • Build your credit score. Start paying off debt and increasing your credit score.