Does My Bad Credit Score Limit My Credit Card Options?May 13, 2011 - 11:46 am
If you have a credit score below what is considered good by lenders (below 730), you indeed can be limited in your choices for credit cards but it doesn’t put you out of the game entirely.
Most card providers will require an excellent credit score before they will approve you for the best interest rates, the best perks, and the highest limits. Those consumers who have had some financial problems in the past but are back on track will be limited in their options but still find reasonable deals from some companies. Those consumers who have serious marks on the credit report and a low score will have to work harder to find a good deal.
The Industry Is Changing
There have been many rule changes in the credit card arena. New regulations imposed by Congress in 2009 have limited the way credit cards work for consumers. In the past, it was moderately easy to get a card but today’s lenders want assurance that holders will not default on their debts. This means the providers will need proof of stable income, proof of stable employment, and proof that consumers applying for a new line of credit have been shown to be responsible with other lines of credit.
This proof of responsibility is found in a consumer’s credit score. If a score is low, it means the consumer did not always meet their financial obligations. This spells trouble for a potential lender. Because of the additional risks of default on the part of the card holder, providers are adding insurance to their risk. This ‘insurance’ comes in the form of higher interest rates and more expensive fees on cards. Limitations are also put on the lines of credit until a consumer can prove themselves credit worthy.
Options for Bad Credit
While you may have to pay more for your past credit mistakes, there are credit cards designed to help you get back on financial track and make you trustworthy in the credit realm once again. Secured credit cards are a popular option for consumers trying to reinstate their good credit status. The secured cards require applicants to deposit cash into an account and that cash is used as a credit balance. The better the secured card is managed over time, the better one’s credit score will become. Regular, on-time payments for several consecutive months will help to increase an account holder’s credit score, which in turn opens the door for more traditional credit card offers getting approved.
Bad credit is not a blocker for getting a credit card but improving your credit can make a difference in the amount of credit card options you are eligible to receive. If you are considering applying for a new credit card, check in with your current credit score to see what your credit says about you. Work on improving your credit status before applying if you have the time and work hard to make sure your credit card is always working for you.
Credit cards can work for you or against you but if you find the right credit card and practice good financial management, a credit card can help rebuild bad credit histories and raise a credit score. Apply for a credit card that matches your lifestyle and practice good spending habits. Never max out your credit cards or charge purchases you can’t afford to pay in cash. Implement good budgeting tools into your financial life and your next credit card can help you get back on the road toward a new, improved credit status.