Bad Credit Credit Cards
Bad Credit is a term used to describe someone who is considered a “high risk” to lenders and other finance companies such as factors.
People with bad credit can still get a credit card. You’ll just pay more as a result of higher interest rates, and the terms of your card deal will be much stiffer than the average cardholder has to deal with. Before applying for Credit cards for bad credit … let us understand what bad credit really means and then we’ll look into obtaining credit cards with bad credit
Credit – Understanding the genesis of bad credit
It’s very obvious that we now live in a credit world. There are lots of banking institutions offering different forms of credit from credit cards to personal loans.
Because of the lack of enough financial education and discipline on the part of most of these consumers, they often find themselves in bad credit situations like court judgment, bankruptcy, and loan default which often make it difficult for them to get any credit at all in the future. You may now want to ask – what exactly is credit?
Credit means that you are getting a service or cash grant to use for your own purpose. You are often bound by a contract or agreement to repay in the future as agreed with the lender or service provider. Credit exists in different forms like loans, mortgages, or credit cards.
Before you can get credit from any financial institution or lending agency, they will first check your credit history. If you have defaulted on a loan before or have bad credit history you will find it almost impossible to get credit any time you apply for it.
However, it’s possible for you to improve your bad credit history or build a new good credit history by repairing your bad credit, thus re-establishing your creditworthiness. This process is called credit repair. It’s the process in which consumers with unfavorable credit histories attempt to re-establish their creditworthiness.
Though there are lots of credit repair companies nowadays that promise to repair your bad credit for you if you can follow a simple guide, it’s very possible for you to do it yourself – after all, it’s your credit.
If you repair your bad credit it will make it easy for you to get low-interest credit, car, or home loans. However, with a poor credit rating, you may not be able to get a loan or you will be subjected to high-interest rates and several other unnecessary conditions. So it’s very important that you repair your credit if you have bad credit.
Your credit score – how you can improve it
Your credit score is very important in any financial transaction that you make or intend to make in the future. So it’s good you know what exactly your score is, understand its meaning and learn how you can improve it if it’s not good enough.
“Many factors can contribute to a negative rating from the credit reporting agencies. Many factors like non-payment of an account or late payments over an extended length of time, can contribute to someone getting a “bad credit” rating or poor score. Whether non-payment of an account is willful or due to financial hardship, the result can be the same, a negative rating. … But there is hope to get credit cards for people with bad credit, poor credit, or lower credit scores”
Credit report – its effect on your personal credit
A credit report is a compilation of your credit history, past financial transactions, and personal information possible. This report is usually compiled by accredited agencies known as credit reporting agencies.
Credit reporting agencies are organizations that help credit card companies, loan companies, banks, and departmental stores in the country ascertain the creditworthiness of their would-be clients.
Once they have detailed information from these sources, they give it to any organizations in need of it when requested. Though they keep on file information concerning you and your credit, they don’t make final judgments as to your creditworthiness. The decision is up to the credit card companies or any lender which you are dealing with.
Credit cards – types and what you need to know about them
Nowadays, everybody wants to have at least a credit card. Everywhere you go you see adverts from various banks and other financial institutions offering you credit cards. However, before you apply for a credit card, there are several factors you need to consider. So it’s very important that you know more about the types of cards available, and one that will work best for you.
Secured credit card: A secured credit card for people with bad credit requires a security deposit as collateral before you can get approval. It’s a type of card that best suits the need of people with no or poor credit who are trying to build their credit history. Your collateral must be equal to or greater in value than the credit amount you are applying for.
With a secured card, you put up your own money (into a savings account with the bank you are applying for a credit card) and that amount (or part of it) is the credit line for your card. Put in $500 and you could have up to a $500 credit line. You can deposit anywhere from two hundred to two thousand dollars into an account, and that will be your spending limit.
This will give you the flexibility of using a credit card and if you pay off every statement you are letting creditors know that you can handle credit (again) and your bank may soon begin extending your credit line beyond what you have put in. So you are on your way back to healthier credit, to a status where you will no longer need a secured card.
Business credit cards: These are the cards that are available for business owners, directors, and business executives. They come with several features just like any traditional credit card. You have to consider the terms and conditions for these types of cards too before applying.
Student credit cards are another type of credit card specifically for students. These types of cards are made for students because of their lack of credit history, and if given a chance they can build their credit history with such cards.
Prepaid credit cards are a set of cards that are just acceptable wherever the traditional credit cards are acceptable, but they are not credit cards. You will have to always transfer money to your card before you can make use of the card and you may not be able to spend more than you prepaid for the card.
Presently this is almost the best card for people that want to avoid interest and other fees charged on traditional credit cards and also for people with bad credit. However, other little charges like monthly fees, application; over the limit, and ATM fees are still applicable, but these get offset if you pay your bills via money order.
Whichever card you decide to choose make sure that you go over the terms applicable very well to avoid putting yourself in financial bondage. In the second part of this article, we will continue looking at other types of credit cards.
Balance credit cards are unsecured standard cards designed to allow consumers to save money in interest charges by transferring higher interest credit card balances onto a lower interest rate credit card.
Low-interest credit cards are other types of non-secured standard credit cards. They offer either a low introductory APR that changes to a higher rate after a certain period of time or a low fixed rate. You can take advantage of the low introductory APRs to make larger purchases for now and pay them off several months later. It won’t be possible to get this credit card for people with bad credit.
Air Mile Credit cards are cards that are good for people that travel frequently or planning to go on vacation. It’s a form of reward card that allows you the opportunity of obtaining a free airline ticket. You will need to accumulate specified air miles before you can be entitled to a free ticket. All accumulated mile points will be based on the dollar amount of your credit card purchases over a period of time based on a predetermined point level.
Specialty credit cards are another set of standard non-secure cards designed specifically for individual business users and students with unique and special needs.
Make sure that you study the terms of any of the cards that you pick very well to avoid risking your credit rating. Also, when you pick any of the reward cards make sure you study the forms and offers very well because credit card issuing companies do offer different reward programs, and their promotional offers often change. So make sure you thoroughly look over the card\’s terms and conditions of each specific card before applying.