Bad Credit May Not Necessarily Be a Problem

A large number of Americans have experienced some kind of financial hardship over the last few years and credit scores are not what they used to be. In fact, more products are becoming available to consumers who are facing the lasting effects of low scores and bad credit history. Many of these same consumers are still in need of credit in order to repair their current bad financial situation. It may seem illogical to advise these consumers to apply for a card but it just might be the most logical next step.

How to Get Credit with a Bad Score

Ideally, everyone needs to work on their score in order to be assured better financing rates and low interest rates. If you have a bad score against you, you will need to work on reversing your mistakes. You can accomplish this by getting back on track in your financial life and establishing a budget to ensure your current financial obligations are met.

Once you have figured out income and expenses and know where you stand financially, it may make sense for you to apply for a card that matches your current needs. For consumers with very poor credit, a secured card may be the only available choice.

How Secured Cards Make a Difference

A secured card uses a cash deposit as the consumers credit limit. Different secured card providers have different requirements for how much cash you must present upfront but it generally ranges between $300-$500. You must still apply for the secured credit card and depending on where your credit score lies, the provider will disclose the terms for new card. Typically the amount you deposit will act as your credit limit and you must continue to make regular monthly payments to bring your account current.

The secured credit cards can make a difference to your credit standing but only if you have confirmed the provider reports account activity back to the credit reporting agencies each month. If the card company does not report your account, the secured card will not be a resource you can rely on to improve your credit rating.

Once you have shown consistency with on-time payments and responsible credit use, traditional credit cards may then be an option for you to further rebuild your credit profile. Always be sure to check the terms and conditions of the initial secured cards and the subsequent traditional credit card to confirm it meets your overall financial needs.

Secured Does Not Equal Prepaid

One other important aspect of the secured credit card is that it should not be confused with prepaid cards. Credit cards that can be purchased in a department or grocery store labeled as ‘prepaid’ are vastly different than a secured credit card account. While there is a similarity between the two cards where cash upfront is necessary, prepaid cards do not help improve your current credit standing.

Secured credit cards still require consumer follow through but can be a springboard to better credit cards at better terms. Applying for a secured credit card may be your first step back to the good side of credit.