Credit Cards For People With Bad Credit

What is considered bad credit?

Lots of people on all financial levels can have bad credit. Bad credit is when you have a poor credit rating based on a FICO score that ranges from 300 to 579. These numbers represent the lower end of credit scores. The numbers go up from fair; good; very good; and exceptional up to 850 points.

Why Bad Credit Presents Financial Problems

When businesses see your low credit score, you may have problems getting approval for basic life things. For example, you could have trouble getting a standard credit card, a home loan, a car loan, a personal loan, or you may have to pay a deposit on just to have your utilities turned on.

Unfortunately, if you are approved for a loan, you will have to pay a very high-interest rate. This is not the financial end of getting a loan with bad credit. There are high fees and penalties.

Also, consumers will be asked for collateral which means your car, house, or other personal items. And if you miss your loan payments, you will lose whatever collateral item you registered, i.e., car or house.

Credit Cards For People With Bad Credit

Why You Have A Bad Credit Score

As we all know, unexpected things happen in life and you get into a financial bind. Whatever the reason is for your bad credit, there is a helpful step toward repairing your credit. You can apply for a card designed for people with bad credit.

What determines your bad credit score? The following factors determine your credit score:

  • Your overall payment history
  • Your total outstanding debt
  • Your length of credit history
  • Your mixture of credit types
  • Your hard credit inquiries or how many credit cards or transactions you have applied for
  • Too many missed payments
  • You filed for bankruptcy
  • You have gone through a foreclosure

If you have no credit history, believe it or not, even trying to stay credit free raises a red flag with FICO. Having no good or bad credit placed you in a category called “limited” credit history.

A limited credit history is a negative on your credit score because it looks like you don’t have any experience using a credit card or making informative buying and selling knowledge.

Secured and Unsecured Credit Cards

Despite a bad credit connotation on your credit history, you can still get a credit card. There are two types of credit card options for bad credit – “secured” and “unsecured.”

 Secured Credit Card

A secured credit card is accompanied by making a deposit into a savings account. Your credit card limit is based on the percentage of your checking account deposit. Any secure credit card deposit is seen as a collateral fund. For example, if you deposit $500 into your account, then this is your credit card limit.

However, you can make a deposit of up to $3,000. This deposit is based on the brand-named credit card issuer and their requirements for you as being creditworthy. Today, many credit card companies allow you to make a higher deposit after you have proven your creditworthiness.

Why does top named credit card companies offer credit cards for people with bad credit? The reason is that a credit card issuer is not on the hook for anything if you do not pay your regular credit card amount. This is because on a secured credit card if you don’t pay your bill, the issuer will simply and quickly take the money you owe from your bank deposit.

Present-day secured credit cards often come with certain benefits. Secured credit cards have many features that make it easy for you to increase your credit score goals.  One such example is that some cards allow you to set your own payment due date. Other cards offer consumers rewards that can be applied toward your credit purchases.

Unsecured Credit Card

When you use a secured credit card responsibly, you can improve your credit to apply for and receive an “unsecured” card. An unsecured credit card for bad credit means that your card does not require a deposit. Also, unsecured credit cards carry a higher interest rate.

Without depositing a dollar amount on a secured credit card, your unsecured card may charge higher fees with a low spending credit, i.e., $200 to $400. Unsecured credit cards for people with bad credit is a good start especially if there is an emergency where a low amount like $200.00 may be needed.

how to Credit Cards For People With Bad Credit

Which Option Is Best For You to get Credit Card For People With Bad Credit?

Be mindful that some brand name issuers for both secured and unsecured cards may or may not charge you an annual fee. Before you consider whether your best option in credit cards for bad credit is good for you, look at all the different fees that financially impact your budget.

Whether you receive a secured credit card or an unsecured credit card, both have the same potential financial goal for consumers. First, get in the habit of making small purchases each month in small amounts that you can pay off in full.

While both types of credit cards allow you to make purchases and if used correctly, you improve your credit score. Also, in due time you can improve your payment history, allowing you to change from a secured or unsecured credit card to a new standard credit card.

Being Offered a Credit Card For People With Bad Credit

The named-brand credit card issuers that you see on TV and that are known around the world are offering credit cards for people with bad credit. Why? Because they are hoping that you will become a long-term customer and improve your credit score rating for more business.

What this means is that you are very likely to receive a brand name credit card mailing offering you a card that has been pre-approved or pre-qualified. The benefit of using secured or unsecured credit cards for people with bad credit means that you should see a positive credit rating within a few months.

Whether you opt for a secured or unsecured credit card, please start making the right spending choices. Remember that perhaps after a year, you can change from a secured or unsecured credit card to a standard unsecured credit card that has little or no annual fee.