Credit Cards for Those with Low or No Credit ScoresSeptember 9, 2010 - 9:08 am
Applying for a new credit card requires a credit check and if you have low credit scores and negative credit information listed on your credit report, it can make it more difficult to find a good credit card. It can also be harder to be approved for a new credit card.
Your credit score will be a big factor in the credit card company’s determination of approval. Credit scores range from 300 to 850 based on a complex formula used by the credit reporting bureaus. For those who have score under 700, you will not qualify for most cards with a good APR. However, there is hope for people with low or no credit scores.
Credit Cards for Less-than-Perfect Credit
Because credit cards are unsecured debt, card companies are particular about who can receive on. In the past, credit cards were much easier to get but with the significant increase in defaults, companies are much more cautious.
There are some banks that offer unsecured credit cards for people with bad credit but a safer bet would be applying for a secured credit card. Secured cards work like a traditional credit card except customers must put money into the card account. The amount of money paid in is used like the card’s credit limit. You make a monthly deposit to the account much like a pre-paid card or bank account. The advantage of a secured card is that even though you are prepaying the account, the creditor still reports the information back to the credit bureaus. Since you are depositing money, your account is always listed as being paid on time as agreed.
With the positive information being reported back on your credit history, your credit score will also increase. The more you use the card and keep the balance positive, the better your credit score will be. After a year of making deposits and keeping the card active, your credit score may be high enough for you to apply for an get accepted for a traditional credit card without making deposits.
Credit Cards for People with No Credit
When you have not yet built up a credit history, like many student entering college, a secured credit card would also be advantageous to building a solid credit foundation. Another option for qualified individuals is a student credit card. These cards cater to younger consumers who have not established credit but who need an emergency back up while away from home for the first time.
While using credit cards irresponsibly is one of the prime reasons consumers have low credit scores, proper use of a good credit card can be instrumental in repairing bad credit and building a solid credit history. It is good practice to work at cleaning up a negative credit history and pay off other outstanding debts before applying for a new credit card.
Paying credit cards on time each and every month is a sure way to boost a low score and keep negative information off your report. Credit card companies are tightening up the purse strings and are apt to refuse any application deemed as a credit risk. By paying regularly on a traditional card or keeping a secured card active, you can prove to banks that you are able to manage money and handle credit responsibly. It is also important that you only apply for one or two credit cards at a time. Too many credit card accounts and too many inquiries can cause your credit score to go even lower. Keep credit cards and their respective balances low and you’ll benefit from better credit scores and more opportunities for a good credit card deals.