If applying for a credit card with bad credit, don’t be surprised if you get a few doors slammed in your face. Creditors have tighten their guidelines, which has resulted in many people getting turned down for credit. Banks understandably want to lower their risk, and in their eyes, people with excellent credit scores and good payment records are less likely to default. It makes sense from their standpoint, but it doesn’t benefit the people who need credit to improve their credit.
Getting a credit card for bad credit is challenging, but possible. The problem is that many consumers don’t know where to look. They assume that all credit cards and banks are the same, and they apply for any random credit card. This is a huge mistake because numerous credit cards are reserved for people with excellent credit.
If you have bad credit and you’re ready to make improvements, a credit card can give you a much needed boost. The tricky part is finding a bank that will approve your application. Nonetheless, several options are available to you.
Secured Credit Cards
Secured credit cards are by far one of the easiest types of credit cards to get with bad credit. It’s typical for banks to check credit reports and credit scores before approving a credit card application. However, many banks that issue secured credit cards do not run a credit check. In other words, your credit doesn’t factor into the approval. These credit cards do require a bit of planning on your part. You’ll have to pay the issuing bank a security deposit, as well as other upfront fees. Security deposits can be as low as $300. This money serves as collateral for the credit card and the issuing bank deposits the funds into an FDIC savings account.
Retail Store Credit Cards
Some people aren’t big fans of retail credit cards because they limits where consumers can shop. However, retail stores have a reputation for approving people with less than perfect credit. Plus, many retail stores report to the three credit bureaus. This is an excellent way to get your foot in the credit door and raise your FICO score. Simply buy a couple of inexpensive items from the store each month and then pay off your balance in full each month. The retail store will report your excellent payment habits to the bureaus each month, which slowly improves your credit. Keep this up and you’re one step closer to an unsecured major credit card.
Unsecured Credit Cards
A few banks do not issue unsecured credit cards to people with bad credit, but if you can find a bank that does, these credit cards are worth consideration. Unsecured credit cards do not require a security deposit, but they can be expensive if you have a low credit score. Annual fees and high interest rates are typical with these cards. However, if you shop smart and only charge what you can afford to pay back each month, you’ll avoid high interest charges and maintain a low balance.
This article was first published on http://moneyprime.com.