The last few years have seen a number of people who previously had impeccable credit ratings witness their credit score plummet due to circumstances beyond their control. Sadly, this has disqualified them from taking advantage of some of the excellent credit card offers available due to their perceived “bad credit”. Credit cards do exist however which enable such unfortunate people to start rebuilding their credit score.
Even if your own financial irresponsibility has resulted in your bad credit score, prepaid credit cards, secured “bad credit” credit cards and a few unsecured, no deposit “bad credit” credit cards exist to allow you to re-establish your credit score. By maintaining your credit card account in good order, making payments on time and getting your credit management reported back to credit bureaus, you can shed your bad credit score for good.
Prepaid “Bad Credit” Credit Cards
Selecting the option of a prepaid “bad credit” credit card may seem like no credit card at all, but there are benefits to taking advantage of this facility. Effectively, you will be seen to have got approval for a credit card, even though you only have available to spend the funds you have deposited into the account. With a prepaid “bad credit” credit card there is no risk of late payments, going over your limit or any of the other practices which contributed towards your bad credit score.
Many prepaid “bad credit” credit cards charge no annual fee or processing fee if you make a certain number of purchases or choose a specific deposit option, so the credit card is free to operate and works in the same way as a debit card – only helping you to establish a credit rating. If you ensure you choose a prepaid “bad credit” credit card with a credit builder facility, reports of your good financial management will reported back to the major credit bureaus and you have started to improve your credit score without it costing you a cent.
Secured “Bad Credit” Credit Cards
Secured “bad credit” credit cards are the next step up from having “bad credit” credit card with instant approval, as these operate by depositing the amount of your initial credit limit with the credit card company as a security. This is normally held by them for a period of thirteen months and refunded to you once you have maintained your credit card account in good order. At that point, your credit card becomes “unsecured” and you may also qualify for an increase of the credit limit.
Although secured “bad credit” credit cards operate in the same way as regular credit cards, you are limited in what you can spend by the amount you deposit. There may be fees associated with establishing the account and late payment penalties (even though it is your own money you have spent) but by demonstrating financial responsibility for little more than a year, you could have significantly improved your credit score with little effort at all.
Unsecured “Bad Credit” Credit Cards
Unsecured, or no deposit “bad credit” credit cards usually have very low credit limits, are expensive to operate and have a high level of APR attached to them. These credit cards for people with bad credit should only be considered if you have no means of getting a prepaid “bad credit” credit card or affording a reasonable security for a secured “bad credit” credit card.
Typically, you will find an unsecured “bad credit” credit card has a set-up fee equivalent to 25% of the allowed credit, high monthly or annual fees and an APR interest rate as high as 60%. Inasmuch as they are a fast-track way to get your credit score moving upwards, the costs associated with a no deposit “bad credit” credit card could scupper your credit ambitions if the costs of operating the card mean that you are unable to afford your balance repayments.
“Bad Credit” Credit Card Summary
The key issue when looking for credit cards for people with bad credit is that you can pre-apply for the credit card account online without it affecting your credit quality. Getting rejected for credit cards which you had no chance of getting does your credit rating no favors at all, so do a little homework and ensure that the “bad credit” credit card that you apply for regularly reports back to credit bureaus on your excellent credit management.
“Bad credit” credit cards may be initially expensive to operate, but represent an excellent opportunity to start rebuilding that damaged credit score and enable you to, in time, take advantage of some of the better credit card offers on the market. Because of the costs associated with credit cards for people with bad credit, you should focus on pre-paid credit card options if you feel that maintaining an account of this nature may be beyond your financial capabilities.