Leading providers of credit cards typically require favorable credit or excellent credit from interested applicants.
In case you have a bad credit score, your application might get automatically declined. Nevertheless, you will also come across credit cards that are especially intended for people that have bad credit. These credit cards could be known as specialized credit cards or bad credit credit cards.
DIFFERENT TYPES OF BAD CREDIT CARDS
You can find different types of credit cards for low credit score. If you cannot be eligible for an ordinary card due to poor credit history or low credit standing, you’ve got a wide variety of options to pick from. Consider the following different types of specialized credit cards for low credit score:
Secured Credit Card.
A secured card is the most popular type of bad credit card. Approval for a secured card is not based upon the applicant’s credit history. However, the card holder is expected to provide cash security deposit as guarantee for repayment. The amount can range from as low as $200 to as much as $500 or higher, depending on the credit limit.
Unsecured Bad Credit Card.
This bad credit card does not require a security deposit. Nevertheless, the interest rate and the fees are expected to be much higher than a secured card due to the greater risk posed to the issuer.
Both secured and unsecured credit cards function like a regular card. Only the card holder and the issuer know the fact that the account belongs to a person with imperfect credit history. This is because the term “secured” or “bad credit card” is not printed on the actual card.
Prepaid Debit Card.
Prepaid credit or debit cards do not provide credit lines. The card holder is expected to submit funds in the debit account to be able to use the card for payment. When the balance runs out, the card holder must make a new deposit or “reload” the account in order to use the card for new transactions.
In the past, prepaid debit cards cannot be used for rebuilding bad credit because payments are not reported to the credit bureaus. Today however, you can find issuers of prepaid cards that offer credit reporting provision. Thus, as you use your prepaid card for payment, you are also given the chance to boost your credit score.
Using Specialized Credit Cards for Credit Repair
Specialized credit cards or bad credit cards are great tools for improving a low credit score. The important thing to remember is to use the credit card regularly for payment to pay back your charges on time. This is the best way to show future creditors that you are capable of managing debt and credit responsibly.
To make repayment easy, use your secured card or unsecured card for bad credit for minimal purchases only. Don’t forget to check to your balance first before charging a new purchase to your account. If you can keep your credit usage below 30% each month, you can surely improve your credit score and you can minimize the risk of bad debt.