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Step 1: Be realistic

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Take an honest look at your financial situation.

Credit card issuers like to wow consumers with low interest rate offers and perks like cash back and discounted concert tickets. But remember, you have bad credit — so no soup for you.

You'll be lucky to get a card with a high interest rate, and your only reward will be points toward a better credit score. 

Start by checking your credit score and credit report. There are free credit check options that will give you a quick look at your score, or you can opt to pay a small monthly fee to see your full report and get ongoing credit monitoring service.

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Step 2: Explore your options

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There is no One-Size-Fits-All solution for bad credit. Instead, you need to find the solution that works best for you.

Department stores and other retailers often have more relaxed standards for credit applicants. If your score is decent enough to be accepted, you might be able to get a store credit card.

These cards usually have low credit limits and might work only at specific stores, but they're a great way to reestablish credit.

Secured credit cards are another good option for applicants with poor credit. These cards are offered by banks, which require you to make a cash deposit.

The deposit amount becomes your credit limit, so if you don't make your payments, what you owe on the card is deducted from your deposit. But if you use the card responsibly, your deposit money will be returned, your credit will improve and you'll be offered a regular credit card.  

Step 3: Beware of hazards

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Don't be a victim of bad financial actors. Educate yourself on how to remain on the right path.

A person who has bad credit is at risk of being victimized by predatory companies dangling what are called subprime credit cards. 

These cards can come with super-high interest rates (we're talking 30%!), lots of fees, low credit limits and painful penalties if you're late with a payment or go over your limit. Subprime cards can be relatively easy to get, but it's also easy for them to put you in a spiral of debt.

Other companies offer products that won't do much for your bad credit. Prepaid credit cards are technically not credit cards at all. You pay a deposit, and it goes on the card. Your purchases come directly off the deposit amount.

There is no debt to pay back, so there is no benefit to your credit score. The main reason to have a prepaid card is if you don't have a bank account and want to make electronic purchases. 

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Home insurance is an essential expense – one that can often be pricey. You can lower your monthly recurring expenses by finding a more economical alternative for home insurance.

SmartFinancial can help you do just that. SmartFinancial’s online marketplace of vetted home insurance providers allows you to quickly shop around for rates from the country’s top insurance companies, and ensure you’re paying the lowest price possible for your home insurance.

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Step 4: Stick to your plan

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Once you have a plan, the only thing left to do is follow it.

Make a decision about what to do next and make sure you don't relapse into bad financial habits. Remember your goal of rebuilding your credit score long term, and before you know it, you'll start seeing better scores.

Little by little, you can revive your credit score!

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About the Author

Moneywise

Moneywise

Moneywise Editorial Team

The Moneywise Editorial Team is a group of passionate financial experts, seasoned journalists, and content creators who are deeply committed to providing unbiased, relevant, and accurate financial information. With years of combined industry experience, our team is dedicated to maintaining the highest journalistic standards and delivering informative and engaging content. From personal finance and investing to retirement planning and business finance, we cover a broad range of topics to suit the financial needs of our diverse readership. You can trust the Moneywise Editorial Team to empower you with the knowledge and tools necessary to make wise financial decisions.

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Disclaimer

The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.