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Best Credit Cards for Bad Credit of August 2022

Many or all of the products here are from our partners that pay us a commission. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.

If you've had trouble getting a credit card, then one of these credit cards for bad credit could be the solution. Whether the problem is past mistakes that hurt your credit or having zero credit history to your name, it's all a matter of finding the right card. Whether you're looking to improve or start building your credit, here you'll find our picks for the best credit cards for bad credit.

Great for: Low security deposit and building credit

  • This card is a great place to start when building your credit history. It offers perks rarely found in secured cards, including cash back, no annual fee, and Discover's innovative sign-up bonus. Read Full Review

    • Cash back rewards
    • Great sign-up bonus offer
    • No annual fee
    • Can graduate to an unsecured card
    • Minimum deposit amount
    • No credit score required to apply.
    • No Annual Fee, earn cash back, and build your credit with responsible use.
    • Establish your credit line by providing a refundable security deposit of at least $200. That means a $200 deposit for a $200 credit line. Or a $500 deposit for a $500 credit line. Bank information must be provided when submitting your deposit, and the security deposit equals your credit limit.
    • Automatic reviews starting at 7 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.
    • NEW! Discover helps remove your personal information from select people-search websites. Activate by mobile app for free.
    • Get an alert if we find your Social Security number on any of thousands of Dark Web sites.* Activate for free.
    • Click "Apply Now" to see terms and conditions.

Great for: Cash back

  • A leading student credit card with a rewards program that goes toe-to-toe with some of the top rewards cards we've come across. Read Full Review

    • Rotating bonus categories
    • Great sign-up bonus offer
    • No annual fee
    • Credit score monitoring
    • No fixed bonus categories
    • No credit score required to apply.
    • INTRO OFFER: Unlimited Cashback Match – only from Discover. Discover will automatically match all the cash back you’ve earned at the end of your first year! So you could turn $50 cash back into $100. Or turn $100 into $200. There’s no minimum spending or maximum rewards. Just a dollar-for-dollar match.
    • Earn 5% cash back on everyday purchases at different places each quarter like, grocery stores, restaurants, gas stations and when you pay using PayPal, up to the quarterly maximum when you activate. Plus, earn unlimited 1% cash back on all other purchases – automatically.
    • NEW! Discover helps remove your personal information from select people-search websites. Activate by mobile app for free.
    • No annual fee and build your credit with responsible use.
    • 0% intro APR on purchases for 6 months, then the standard variable purchase APR of 14.49% - 23.49% applies.
    • Click "Apply Now" to see terms and conditions.

Great for: Low security deposit

  • Comes with a low initial security deposit and no annual fee, making it a top pick if you want to open a secured card account without breaking the bank. Read Full Review

    • No annual fee
    • Low minimum deposit amount
    • Can graduate to an unsecured card
    • No minimum credit score required
    • No rewards
    • No free credit score monitoring
    • No annual or hidden fees. See if you're approved in seconds
    • Building your credit? Using the Capital One Platinum Secured card responsibly could help
    • Put down a refundable security deposit starting at $49 to get a $200 initial credit line
    • You could earn back your security deposit as a statement credit when you use your card responsibly, like making payments on time
    • Be automatically considered for a higher credit line in as little as 6 months with no additional deposit needed
    • Enjoy peace of mind with $0 Fraud Liability so that you won't be responsible for unauthorized charges
    • Monitor your credit score with CreditWise from Capital One. It's free for everyone
    • Get access to your account 24 hours a day, 7 days a week with online banking to access your account from your desktop or smartphone, with Capital One's mobile app
  • People with no or limited credit histories will be hard pressed to beat it. The rewards program and lack of fees are clear standouts in the category. Read Full Review

    • No credit history required
    • Competitive cash back rewards
    • No fees
    • Fixed payment due date
    • No 0% intro APR offer
    • No fees whatsoever. No late fee, foreign transaction fee, annual fee, or any-other-kind-of-fee, fee.
    • Variable APRs range from 14.49%-28.49%
    • Up to 1.5% cash back on eligible purchases after making 12 on-time monthly payments.
    • 1% cash back on eligible purchases right away
    • 2% - 10% cash back at select merchants
    • $300 - $10,000 credit limits
    • No credit score? No problem. If eligible, we'll create your Cash Score instead.
    • See if you're pre-approved within minutes without impacting your credit score.
    • Build credit alongside hundreds of thousands of Petal card members.
    • Petal reports to all 3 major credit bureaus.
    • No deposits required
    • Card issued by WebBank, Member FDIC
  • The combination of cutting fees competitors charge, along with the opportunity to earn rewards, makes this a worthwhile card to consider when building credit. Read Full Review

    • Easy approval process
    • No annual fee
    • Rewards from select merchants
    • No foreign transaction fee
    • Limited rewards opportunities
    • No 0% intro APR offer
    • $0 Annual Fee
    • Variable APRs range from 21.49%-30.99%
    • $300 - $5,000 credit limits
    • Earn a credit limit increase in as little as 6 months. Terms and conditions apply.
    • No credit score? No problem. If eligible, we'll create your Cash Score instead.
    • 2% - 10% cash back at select merchants
    • See if you're pre-approved within minutes without impacting your credit score.
    • No annual or foreign transaction fees.
    • Build credit alongside hundreds of thousands of Petal card members.
    • Petal's mobile app makes it easy to manage your money, track your spending, and automate payments.
    • Petal reports to all 3 major credit bureaus
    • No deposits required
    • Card issued by WebBank, Member FDIC

Great for: No credit check

  • A good option for new to credit applicants. The fact that there's no credit check could justify the annual fee for some cardholders Read Full Review

    • No credit check
    • Flexible credit limit
    • Reports payments to all three credit bureaus
    • Annual fee
    • No graduation to an unsecured card
    • No rewards
    • Minimum deposit amount
    • No credit check is great for building credit
    • $35 annual fee
    • $200 minimum security deposit

Great for: Secured credit card with rewards

  • One of the most competitive secured credit cards we've come across. The rewards program and $0 annual fee are standout features that beat many similar offers.

    • Cash back rewards
    • No minimum credit score required
    • No annual fee
    • Can graduate to an unsecured card
    • Minimum deposit amount
    • Foreign transaction fee
    • A minimum security deposit of $200 (maximum of $5,000) is required to open this account.
    • Earn 3% cash back in the category of your choice, automatic 2% at grocery stores and wholesale clubs (up to $2,500 in combined choice category/grocery store/wholesale club quarterly purchases) and unlimited 1% on all other purchases.
    • No annual fee and no expiration on rewards.
    • Contactless Cards - The security of a chip card, with the convenience of a tap.

Great for: High secured credit limit

  • With a large credit line range for a secured card, this is a great choice. It also comes with rental car insurance and free access to your credit score.

    • Big potential credit limit
    • No annual fee
    • Free credit score
    • High APR
    • Credit limit ranges from $300-$5,000 based on deposit.
    • The deposit is put in an FDIC-insured savings account that earns interest and won't be touched as long as your account remains open and in good standing.
    • Car rental insurance available at no additional cost if you charge the car rental on your card and decline rental company's collision damage waiver option.
    • Free TransUnion® Credit Score.
    • You are not responsible for unauthorized transactions if your U.S. Bank Secured Visa Card is ever lost or stolen.

Great for: Low ongoing APR

  • The standout perk is the low ongoing APR. This pick is also available for people with no credit history and there is no minimum credit score required for approval.

    • No minimum credit score required
    • No credit history required
    • No credit inquiry
    • Low variable APR
    • Reasonable minimum security deposit
    • Reports to all three credit bureaus
    • Annual fee
    • Foreign transaction fee
    • Not available in all states
    • No rewards
    • No Credit History or Minimum Credit Score Required for Approval
    • Credit Line Secured by Your Fully-Refundable Deposit of $200 -- $2,000 Submitted with Application
    • Just Pay Off Your Balance and Receive Your Deposit Back at Any Time
    • Receive Your Card More Quickly with New Expedited Processing Option
    • 24/7 Online Access to Your Account; Try our new Mobile App for Android Users!
    • Includes Free Real-Time Access to Your Credit Score and Ongoing Credit Monitoring powered by Experian
    • Quick and Complete Online Application; No credit inquiry required!
    • Get a fresh start!  A discharged bankruptcy

Bad credit is one of those problems that can affect your life in all kinds of frustrating and costly ways. Landlords can use your credit to decide if they'll rent to you. Employers can use it for hiring decisions. In most states, your credit can even determine how much you pay for car insurance. As you can see, a bad credit score means a lot more than just paying higher interest rates on loans.

On a positive note, anyone can improve their credit. But to do that, you'll need to understand what causes bad credit in the first place and what it takes to build a better credit score.

What is considered a bad credit score?

Bad credit scores range from 300 to 579 using the FICO system and 300 to 600 using the VantageScore system. FICO is the most widely used scoring system, and VantageScore is the second most popular. If you're new to credit scores, it's good to understand that there's more than one scoring system -- and that your credit score is a number that ranges from 300 to 850.

When you have a bad credit score, you won't have many credit card or loan options. You'll likely only qualify for credit cards and loans that are aimed at applicants who have bad credit.

After bad credit, there's fair credit, which is a FICO® Score between 580 and 669 and a VantageScore between 601 and 660. You can get approved for more financial products once you have fair credit, although you'll still have a more limited selection than consumers with good or excellent credit.

How to check your credit score

Knowing your credit score is essential if you want to monitor your financial health and take steps to improve your credit. Plus, it can help guide you in choosing the right credit card to apply for as you begin to consider card options. The good news is it's simple to check your credit score.

One way to do so is to use a free credit monitoring and credit score service. You'll need to sign up for one of these services and log in to view your score. Examples include Experian CreditWorks℠ Basic and Discover® Credit Scorecard. These services are free to use and provide you with a FICO® Score. As a note, Discover doesn't require you to be a cardholder to use their service.

Knowing your score can give you a better understanding of where your finances stand and help you make more informed decisions so you can improve your credit score.

Factors that cause bad credit

Certain factors can cause bad credit. Here are some examples:


If you've filed for bankruptcy or plan to do so, this can be one of the most significant factors that result in bad credit. Depending on the type of bankruptcy you've filed for, this negative mark will stay on your credit for seven to 10 years. It's important to consider this before filing for bankruptcy.

Missing payments and late payments

Payment history makes up 35% of your credit score. If you're missing payments or making late payments, this can cause bad credit. If you've made payment mistakes in the past, you can make changes from now on. If you want to improve your credit, be sure to pay your bills in full and on time.

High credit utilization

Your credit utilization ratio is how much of your available credit you're using. If you have a high credit utilization (using more than 30% of your total available credit), this can negatively impact your score. It's best to use less of your available credit if you want a higher credit score. Using less available credit also shows that you have a smaller percentage of outstanding debt.

Having no credit or minimal credit

If you have little to no credit history, that can be a factor that leads to bad credit. Your best bet is to begin building credit now because the length of your credit history will increase over time, which looks good to creditors.

What are the effects of bad credit?

The biggest consequence of bad credit is that if you need to apply for anything that requires a credit check, you're much more likely to get declined. Examples include:

  • Credit cards
  • Personal loans
  • Auto loans
  • Mortgages
  • Home rental applications

Even if you get approved, the terms will be worse than they would be for a borrower with good or excellent credit. You may get a credit card, but it won't have much in the way of rewards or benefits. A landlord could rent to you, provided you pay a much larger security deposit.

When it comes to loans, it's best to show you an example. Here's how much a 60-month auto loan for $25,000 would cost, using national APR averages, depending on your credit:

Excellent (720 or higher) 4.272% $463 $2,809
Poor (589 or below) 16.735% $618 $12,065
Data source: MyFICO.

Excellent credit would save you $155 per month, and $9,256 in total interest over the life of the loan.

Those are the most obvious effects of bad credit, but they're far from the only ones. Here are some additional challenges you could deal with:

  • Many utilities providers charge security deposits to new customers with subpar credit.
  • Most states allow car insurance companies to charge higher premiums to drivers with lower credit scores.
  • Employers can run a credit check before deciding whether to offer you a job.

Can you erase a bad credit history?

You can't completely erase a bad credit history -- at least not overnight. But, you do have a couple of options when it comes to removing specific concerns:

If something is inaccurate on your credit report and it's having a negative impact on your credit, you can dispute it. You can do this by contacting each of the three credit bureaus to file an official dispute. The Federal Trade Commision has a sample letter that you can use. Your best bet is to send your letter by mail, so that you can track it and have a record of it being sent.

If you have a late payment mark on your credit report and you've been a loyal customer, it's worth reaching out to your creditor to request a goodwill adjustment. They may agree to remove that late payment mark, which can improve your credit history. You can make a request by phone, but sending a letter is an even better idea. A letter gives you a chance to explain in detail why your payment was late.

You can also negotiate with your creditor if you're looking to have a poor mark removed and they're not willing to remove it right away. For example, if you still have outstanding debt with the creditor, you may ask if they will remove the poor mark if you pay the balance in full right away.

These are a few ways to erase parts of your bad credit history. If none of these options work for you, you'll need to continue to work on improving your credit history by making smart financial choices.

What to look for in a credit card for bad credit

The most important thing to look for in a credit card for bad credit is its fees, but you should also check its APR, its minimum and maximum security deposits, and what kind of credit limit you can expect. Here's an explanation of each item.


Most credit cards have fees, but what you don't want are unavoidable fees. Fees for cash advances or balance transfers shouldn't scare you off from a specific credit card -- you can easily avoid both by not making those types of transactions.

Fees that should make you think twice are annual fees, monthly maintenance fees, and any other regular fees the card issuer charges no matter what. These are expenses you don't need, especially from a card that probably doesn't have many benefits.


Ideally, you'll pay your full statement balance and never incur interest charges. But it's also nice to have a credit card that won't gouge you in interest if you ever need to carry a balance. You can calculate your interest payments by using this calculator.

Minimum/maximum security deposit

With secured credit cards, you should check what the minimum and maximum security deposit amounts are. The one that's more important for you depends on how much you have saved for a security deposit.

If you don't have much saved, you'll need to ensure you can pay a card's minimum deposit amount. If you have solid savings and you'd like to pay more up front for a higher credit limit, then you'll need a card that allows a high maximum deposit.

Credit limit

If possible, you should research the credit limits a card offers. This information is usually available with secured credit cards, but you can sometimes get it for an unsecured card as well.

You don't need a ton of available credit. But if your credit limit is too low, it can be difficult to maintain a low credit utilization ratio, and that can affect your credit score.


Not all credit cards for bad credit offer rewards, but some do. As you consider your options, you may want to prioritize cards that offer rewards because they can provide value to you.

You can expect to earn anywhere from 1% to 3% cash back for most credit cards for bad credit with rewards potential. It's worth noting that cards that offer higher rewards rates may have a cap on how much you can earn. You may be able to earn unlimited rewards at a lower earning rate. Remember, some cards for bad credit offer no rewards at all.

How to get a credit card with bad credit

If you want to get a credit card with bad credit, your best bet is to see if you can get prequalified for a card. That way, you can make sure you will be eligible for a card without hurting your credit score with a credit check, only to find that you don't qualify.

While it depends on the card issuer, most of the major credit card companies have prequalification pages on their websites that let you check offers you'll likely be approved for.

To find out if you prequalify, you'll just need to enter some basic personal information. Most card issuers ask for at least some of the following:

  • Full name
  • Address
  • Date of birth
  • Last four digits of your Social Security number

Once you've submitted the required information, you'll see any cards that you have a good chance of qualifying for with that card issuer. Remember that this doesn't guarantee your application will be approved.

If you're not able to get prequalified for a credit card for bad credit, it's a good idea to take some time to work on improving your credit. Ready to get started? Here's how to apply for a credit card and get approved.

How to improve your credit

You can improve your credit score with time and effort. Remember that there is no instant fix. You can't build credit quickly, but you can build it up over time. In order to do this, you need to understand the elements that make up your credit score. Working on each of these can allow you to improve your credit and increase your credit score.

Here are the five factors used to calculate your FICO® Score and how you can get high marks in each one:

  • Payment history (35%): On-time payments are the key to excellent credit. While you can't undo previous late payments on your credit file, you can avoid late payments in the future. That's the number one habit you need to raise your credit score.
  • Credit utilization (30%): Your credit utilization is the sum of your credit balances divided by your combined credit limit. For example, if you have one credit card with a balance of $200 and a limit of $500, then your credit utilization is 40%. The lower you can keep this number, the better. A good goal is to always have your credit utilization below 30%. If yours is higher, then you should focus on paying off debt.
  • Length of credit history (15%): Creditors will obviously consider a borrower who has had a credit card for 20 years to be less risky than one who has only been using credit for three months. The best way to improve in this area is to open a no-annual-fee card and keep it open forever.
  • Credit mix (10%): It gives you a slight credit score advantage if you have both revolving credit, such as credit cards, and an installment loan on your credit file, instead of just one of the two. But since this has only a small impact on your credit score, you shouldn't take out a loan solely to boost your credit. You can attain an excellent credit score even if you only use credit cards.
  • New credit inquiries (10%): When a company looks at your credit report to make a credit decision, this inquiry is reported on your credit report for two years. Credit inquiries only affect your FICO® Score for one year, though. Don't avoid opening a new account just because of the small impact to your credit score, but don't open a bunch of accounts in quick succession, either.

Can I get a credit card without a bank account?

Having a bank account is not a requirement when applying for a credit card. However, application requirements can vary by credit card company, so you may need a bank account to get approved for certain cards.

Even though a bank account isn't required to get a credit card, it does make your credit card payments more convenient. Just about every credit card company lets you pay online if you have a bank account. You can make an online payment that counts toward your bill that same day, so you don't need to worry about making a payment days in advance. Another option is to set up autopay.

If you don't have a bank account, you'll need to find an alternate payment method. There are other options available. For example, you could pay by mail using a money order, or you could pay in cash if your credit card company has a branch in your area. But there's nothing as convenient as paying online. To simplify your payments and better protect your savings, it makes sense to open a bank account.

What is the easiest credit card to get with bad credit?

The easiest credit card to get when you have bad credit is a card that is marketed towards people with bad credit. These cards have less strict requirements in place for applicants. You'll be more likely to get approved for a credit card for bad credit if you have a lower credit score, poor credit history, or limited credit.

Some bad credit cards have easier approval odds than others. Here is one option:

OpenSky® Secured Visa® Credit Card: While this is a secured credit card and will require you to make a deposit before using it, this card has a low annual fee and is a good choice for people who are rebuilding their credit or who have very limited credit. There is no credit check requirement when going through the application process -- making it a good option for many.

If you've unsuccessfully tried to get other secured cards with no annual fee or any other credit card for bad credit, this one may be an easier and better option for you to consider.

Alternatives to credit cards for bad credit

If a credit card for bad credit isn't for you, there are some other options to explore.

Secured loan: A secured loan is a type of loan you can get when you put something of value, such as a car or home, up for collateral. If you're having trouble qualifying for a personal loan, a secured loan could be a good option to help you rebuild credit. However, it's important to remember that the lender can sell your collateral to pay back the loan if you miss payments. For more options and information, check out the best personal loans for bad credit.

Subprime credit card: In fact, you may receive offers in the mail inviting you to apply for these. Subprime credit cards typically have fees that end up costing you a lot of money. Take, for example, the First Access VISA® Credit Card. There's a $95 program fee to open the card. You pay a $75 annual fee the first year. That drops to $48 annually going forward, but in year two, you also pay a $6.25 monthly servicing fee, totaling $75 annually.

To avoid all these extra fees and to know what you're getting into before you apply for a card, check the fee disclosure of any card you're considering. If there are fees just to keep the card open, it's probably not worth the cost.

Want to learn more? See The Ascent's First Access VISA® Credit Card review.

Another option: Try to get a secured card. If that doesn't work out, check out The Ascent's Total Visa card review.

The Picks
Card Rating Great For
Rating image, 5.00 out of 5 stars.
Great For:

Low security deposit and building credit

Rating image, 5.00 out of 5 stars.
Great For:

Cash back

Rating image, 4.50 out of 5 stars.
Great For:

Low security deposit

Rating image, 4.00 out of 5 stars.
Great For:

Cash back

Rating image, 4.00 out of 5 stars.
Great For:

Cutting fees

Rating image, 4.00 out of 5 stars.
Great For:

No credit check

Rating image, 4.50 out of 5 stars.
Great For:

Secured credit card with rewards

U.S. Bank Secured Visa® Card
Graphic of U.S. Bank Secured Visa® Card
Rating image, 4.00 out of 5 stars.
Great For:

High secured credit limit

Rating image, 4.00 out of 5 stars.
Great For:

Low ongoing APR


  • Yes, it's possible to get a credit card without a bank account. However, some card issuers may require you to have one in order to be approved for a card. It'll be easier to pay your credit bill if you do have a bank account, and you may qualify for more cards with one.

  • Yes, you can get a credit card after bankruptcy. It's important to remember that bankruptcy does negatively impact your credit situation. Because of this, you may qualify for less credit cards. You may need to apply for a secured credit card, which requires you to pay a deposit before using the card. In many cases, this deposit is equal to your starting credit limit. Another option is to apply for a subprime credit card. These cards have many more fees attached to them when compared with other cards. Because of these extra fees, these kinds of cards usually aren't the best choice.

  • There are a few ways that you can improve your credit score. Continuing to make on-time payments, keeping your credit card utilization low, and always paying at least the minimum amount due are all good ways to improve your financial habits and improve your credit score.

    If you don't yet have a credit card, getting one is another way to improve your score. If you have a low score, you can apply for a credit card for bad credit. Make sure that you use the credit card regularly, even for small charges, and make all payments on time. With time and effort, you can improve your credit score.

Ask the experts

Todd Christensen, AFC®

Todd Christensen, AFC®

Education Manager at Debt Reduction Services, Inc.

When should consumers consider working with a financial counselor to improve their credit? Is there a range or situation when it might be more beneficial?

I’m not a believer in building credit simply for credit’s sake. Still, having good credit is about more than just getting the best interest rate on a loan.

  • Your credit rating affects your car insurance, so if you’re getting ready to purchase a vehicle or switch car insurance policies, you should meet with a financial counselor.
  • Your credit history might be part of a background check the next time you apply for a job, so meeting with a financial counselor before switching jobs or careers could be helpful in landing your dream position.
  • Most property managers will set minimum credit scores for applicant eligibility, so speaking with a financial counselor before moving could help you get into a better place to live. Plus, your credit rating determines how much, if any, you will have to put into a utility’s security deposit.
  • If you’re thinking about buying a home, you should reach out to a financial counselor ahead of time to put together a plan for building your credit rating. It could mean the difference of tens of thousands or even a hundred thousand dollars of interest saved over the life of a 30-year mortgage. Unfortunately, most homebuyers seek credit advice from their realtor or, at best, their mortgage officer. Realtors tend to have no formal training in consumer credit issues. Loan officers, while they work with credit, focus more on selling and processing loans than on building a customer’s credit. I’ve heard nightmare stories from neighbors and clients of bad credit advice given by a well-intentioned but poorly informed lender or realtor. Seek out a financial counselor or a credit counselor instead.
  • If you’re preparing to get married, you might benefit from a meeting with a financial counselor to create a plan to build or rebuild your credit for upcoming changes to your housing, such as moving into a new apartment or purchasing a home.
  • For those struggling in their marriage or relationship with a partner, meeting with a financial counselor can bring an unbiased and dispassionate view to discussions about money in the relationship.
  • Anyone headed for a divorce should meet with a financial counselor to understand the potential credit-related problems surrounding the household separation and even the divorce decree. Too many divorcees believe creditors are bound by the divorce decree, but they aren’t. If your names are on the account, you are ultimately responsible for making the monthly payment, regardless of what the divorce decree says.
  • If you’re getting ready to graduate from college or are a recent college graduate, meeting with a financial counselor can help bust harmful myths about how and when to build your credit.
  • The best time to reach out to a financial counselor is now, whether:
    • things seem to be going well financially but you’d like unbiased, third-party insight to continue that progress
    • things are going poorly with your credit, and you’re not sure whom to trust with your questions about rebuilding your rating or cleaning up your history
    • you’re just getting by but you know you have room to improve your credit score
  • Typically, consumers tend to reach out to financial counselors in times of crisis, such as:
    • when they’re about to or have already missed a bill payment
    • when they've been contacted by a collection agency
    • when they're facing foreclosure or repossession
    • when they've maxed out their credit cards due to medical emergencies or consumer overspending

How long does it typically take to improve credit with a financial counselor?

Depending on the type of issue dragging your credit down, you might see your credit score improve in a matter of a couple weeks or six to nine months. Correcting errors on your credit report can have an almost overnight impact on your rating. Using free products like Experian Boost can improve your credit immediately. Overcoming the negative impacts of years of spending issues and payment histories, though, can take up to a year or more to counter with positive credit-related behaviors.

How do financial counselors differ from advisors and planners?

Unfortunately, the basic term “financial counselor” has no licensing requirements, no copyright or trademark protection, and no exact definition. It has different meanings in different situations. Although a bit oversimplified, financial counselors tend to work with their clients to improve their day-to-day, month-to-month financial behaviors and choices, such as budgeting, credit building, debt elimination, and saving for emergencies and goals. In many cases, anyone can call themselves a financial counselor and not be in violation of any state regulations or licensing standards. That’s one reason I would always recommend you look for a specific type of financial counselor.

Accredited Financial Counselors® (AFC), on the other hand, offer counseling on budgeting, credit building, debt elimination, and consumer behaviors through private practice or through a sponsoring organization, such as a military base, university, or nonprofit. They must have 1,000 hours of experience and pass a rigorous test in order to use the title of AFC. (Disclaimer: I’m an AFC.)

Finally, financial advisors and planners are in the business of offering advice about or selling products to help their clients build wealth long-term. While financial advisors and planners require licenses to recommend and sell securities, insurance, and other financial products, AFCs do not sell or recommend products for commissions.

What are common misconceptions around working with a financial counselor?

One common misconception about working with a financial counselor is they only work with the extremes: the very rich or those in financial need. The truth is that most households would benefit from working with a financial counselor. According to Career Builder, nearly 80% of workers earning less than $100,000 a year live paycheck to paycheck even before the coronavirus pandemic. Plus, the Federal Reserve reports that 2 in 5 American households are unable to come up with $400 in an emergency without affecting their ability to pay their regular bills. Therefore, most American adults could use financial counseling, whether it involves building or rebuilding their credit rating, accelerating their debt elimination plans, or putting barriers in place to stop impulse spending.

Another misconception is that financial counselors charge large fees. Many Accredited Financial Counselors (AFCs) provide their services at no charge through a nonprofit, military base, or other organization. Others have set up their own private practice, giving them greater latitude in the services they provide. Still, their fees are reasonable for the short- and long-term financial benefits they provide.

Many people think meeting with a financial counselor would be too embarrassing or humiliating. But there is no shame in wanting to improve your situation. For example, AFCs are trained to avoid making the consumer feel ashamed of their previous behavior. Shame and embarrassment do not lead to positive changes. AFCs focus on future goals and objectives, not on past mistakes or choices.

Some people believe they have to get super organized with all their financial documents and bills before meeting with a financial counselor. Actually, financial counselors can help simplify the process of organizing household finances by helping to prioritize tasks and by providing recommendations for helpful apps and other tools.

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