If you saw your credit score tumble through no fault of your own during the recent
downturn, your decision to start looking for new lines of credit again can be an
important one, but one that you must approach cautiously.
When it comes to these cards, there are a relatively small number of options available
to you, as lenders are going to be wary of your ability to handle your finances.
This isn't a reflection on you, but rather on your credit score, which doesn't take
into account your current salary or any other considerations that may have changed
since you lost ground where your rating is concerned.
Secured credit cards
Perhaps the best possible option for rebuilding your credit score with a new account
is by reviewing credit card offers for secured accounts. The difference between these
cards and traditional credit cards is that you will be required to make a down payment
to establish your credit limit.
This is often as low as a few hundred dollars, but is important because it shows
a lender that you have some amount of financial flexibility that you can tap. Once
your credit limit is established, you can use the card as you normally would, but
you should keep in mind two things about these accounts.
First, the interest rate on them is typically much higher than those you may have
been used to in the past, meaning that any balance you carry over from one month
to the next will end up costing you more. For this reason, it might be a good idea
to use this card sparingly, and pay off whatever balance you accrue every month in
full when the bill comes.
Second, these accounts usually also carry an annual fee, meaning that you will have
to keep these added costs in mind.
When obtaining a secured credit card, it is also important to make sure that the
company issuing it will report your activity to the various credit bureaus.
If so, it can be essential to getting your credit score back on track, but if not,
it won't be able to help you achieve your goals of rebuilding your rating.
cards are more like a debit card than a credit card, but requires no credit
check at all and can provide you with a little bit of financial flexibility when
it comes to dealing with your day-to-day money needs. You simply load money onto
the account and then spend that money anywhere your card is accepted.
However, because these cards aren't credit, they also won't help you to rebuild your
rating. Further, they typically come with a number of fees for transactions
you may make on a regular basis, so it's important to weigh the true cost of this
type of account when making your decision.
Whenever you are dealing with accounts designed specifically for consumers with
bad credit, it's important to remember that they're only intended to be used as
a kind of credit training wheels. Once your score is back to a more respectable
level, you will be able to apply for a credit card that may be of greater benefit
and possibly lesser cost to you.
If you're dealing with bad credit, use our
credit card search engine to narrow down the list to cards you can qualify
for and get back on the right financial track. The CreditCardApplications.com search
engine shows you a short list of the credit card offers most appropriate for you,
saving you time in comparing cards and the trouble of inadvertently filling out
a credit card application which is likely to be declined.