The importance of your credit score is hard to deny in the modern era of consumerism. Even purchases for basic goods and services can be held back in some cases for those struggling with poor credit. If you have less than perfect credit and are looking for a way to rebuild your score, credit cards for bad credit may be a feasible option to get you started.
There are a number of reasons that you may now find yourself with a rocky credit history. With many people struggling through the recent economic downturn, it is not unusual for people to have blemishes like bankruptcy or foreclosure on their credit reports. Others have simply used poor judgement in the past and mismanaged their money, leading to lower credit scores.
Regardless of the reason for your poor credit history, there are a lot of people facing this problem, and this prevalence is making it more common for lenders to offer credit cards to people in this situation. While they may not be the best credit cards, you can use them to rebuild your credit carefully and gradually.
Be Realistic About Your Credit Score
Having a good understanding of how lenders view borrowers with poor credit and being realistic about your own credit score can help you tremendously as you look for credit cards for people with poor credit.
Essentially, an accurate view of where you stand will help you see that lenders may feel they have more to lose by issuing you a line of credit. As such, you may not receive the best terms. However, if you can work within the offered terms successfully, you can prove that you are getting your credit back on track and will likely start seeing an improvement in the credit card offers you are approved for.
So, what types of restrictions or credit card terms can you expect to be offered with bad credit?
Typically, credit cards designed for people with bad credit are usually secured credit cards, and they generally require that you pay a credit card fee and a higher interest rate on the purchases you make with your card. Additionally, you may be forced to work within a very low credit limit, which creditors use to ensure you will make payment on any outstanding debt.
Choose the Best Card for Your Situation
If a secured credit card seems to be your only option, you should compare all of the terms presented to you for various cards, including interest rates, application fees, annual fees, and credit limits, and make a determination as to which will suit your financial situation in the best way. The idea is to work on your credit, so you should choose an offer that allows you to stay within the card’s terms easily every month.
If you can only qualify for a card with a considerable interest rate, limit yourself to small purchases that can be paid off at the end of each billing cycle so you never carry a balance and are not overextended due to high interest rates. You should also make sure that you pay your bill on time as required by the terms of your credit agreement. Not doing so can result in large fees, harm your credit score even more, and move you further from your goal.
Once you believe you have found a credit card offer that makes sense for you, you should also determine the card issuer’s credit reporting practices. Because many people who accept offers for secured credit cards are working on their credit, your card issuer will most likely report your payment schedule monthly to the three major credit bureaus. This is a key feature that you will want in any offer because it ensures that your responsible payment practice is going towards the rebuilding of your credit.
Your hard work will pay off eventually, and your credit score may begin to show improvement in as little as 12 months. With a little time, you will be able to move past having to use credit cards designed for people with bad credit and start qualifying for more established lines of credit with much more desirable terms.