Have you ever been turned down for a loan for not having credit or not enough credit. And felt how unfair it was that in order to build credit you need to have credit. Well there is a process to building credit and tools you can use to do it right.
One such tool is a credit card. The problem is that most people apply for cards without reading the credit qualification.
Poor credit credit cards can also be used by those who have yet to establish credit history. Since no credit assessment is needed, anybody can easily get approved regardless of what credit history or credit score.
On this post, let’s take a look at the most used credit cards for individuals with no credit history.
Secured Credit Cards
A secured credit card requires the submission of a security deposit. The amount of deposit can range anywhere from $300 to $500 or higher, depending on the issuer. The cash security deposit also determines the credit line given to the card holder. Some issuers provide slightly higher or lower credit limit than the security deposit. In case the card holder defaults payment or becomes delinquent, the deposit will be used to pay for the debts.
Unsecured Bad Credit Credit Cards
There is another type of bad credit credit card in the market. Like regular credit cards, an unsecured bad credit card does not require the submission of security deposit. Nevertheless, because of the risk involved, unsecured cards for people with bad credit or no credit are expected to carry higher interest rates and fees. The credit limit provided will also be lower than regular credit cards.
Prepaid Credit Cards
Prepaid credit cards or debit cards can also be used to establish credit history. People with bad credit can also use prepaid cards to improve their credit scores. Nevertheless, prepaid debit cards do not provide its cardholders with a credit line. This means you cannot make advanced purchases payable at a later time. To use your prepaid debit card for payment, you must have an existing cash deposit in your account. Once the balance runs out, the debit card holder is required to make a new deposit or reload the card to use it for other transactions.
Choosing the Right Bad Credit Credit Card
Whether you decide to get a secured credit card, an unsecured bad credit card, or a prepaid credit card, there are some factors that you need to consider. Check out the following aspects:
Credit reporting service
. See to it that your chosen credit card for bad credit will report your payments to the major credit bureaus as it is the only way you can establish credit history or improve a low score.
Reasonable interest rate
. Make sure that your secured credit card or unsecured bad credit card carries a reasonable interest rate. If the card offers an introductory rate, check how much the regular APR will be when the introductory period expires.
Minimal set of fees.
Check all the fees associated with your bad credit card. See to it that the maintenance costs are within a reasonable range especially when looking for a prepaid debit card.