Comprehensive financial planning – You’ve defaulted on past credit agreements and this has been reported to credit reference agencies. “I have a horrible credit and need a credit card,” describes your position perfectly. Don’t despair as issuers offer a variety of pre-paid, secured and unsecured credit cards for damaged credit on revised terms, says comprehensive financial planning expert.
Your application for a credit card has recently been declined because issuers have tightened their eligibility criteria in the face of rising default rates, adds comprehensive financial planning expert. Credit cards for poor credit scores don’t involve credit scoring. Issuers minimize the risk they face by requiring a cash deposit or by offering a lower credit limit.
Unsecured Credit Cards for Poor Credit
Before you lower your credit score, you used to have an unsecured card. This undoubtedly explains why so many people with adverse credit have a preference for these cards. Unfortunately, unsecured bad credit history credit cards have a number of potential drawbacks.
Given that you now represent a far greater risk to the issuer’s balance sheet, you’re likely to enjoy a credit limit of just $250 and will face a variety of additional charges. Although your limit will be reviewed after 6 months, provided that you’ve managed your account properly, it may not be a suitable card for your spending needs as per your comprehensive financial planning.
Secured Bad Credit History Credit Cards
If you require a higher credit limit, a secured bad credit credit card offers you greater scope for spending. This is because you are taking away any risk that the issuer faces with a minimum cash deposit of $200. The higher the amount you deposit, the more credit will be extended to you.
Secured cards usually have a lower APR and charges. Provided that you settle the balance within the defined grace period, you’ll be able to avoid paying interest. Many issuers don’t charge an annual fee, but you’ll need to trawl the market and check the small print to be 100% certain.
They help to fix your credit because issuers report to credit reference agencies. As long as you pay punctually at the end of the month, you can dramatically increase the likelihood of getting approval for mainstream cards in the future. Pay late and the rebuilding process will need to begin again.
Pre-paid Bad Credit Rating Credit Cards
If you’ve experienced difficulty managing credit in the past and have run into financial difficulties, a pre-paid credit card could offer the perfect solution. You aren’t allocated a credit limit; you load your own funds onto the card in exchange for a small fee. If your new card displays the “creditbuilder” symbol, the issuer will report to credit reference agencies which will provide a welcome boost to your credit score and abide to your comprehensive financial planning.
I Have Horrible Credit and Need a Credit Card, but Why?
If you don’t have a bad credit rating credit card it may not be possible to book a hotel room or get your car repaired at a garage. Reserving a portion of your credit limit enables merchants and hoteliers to cover costs, such as damage, theft, cancellations and subsequent purchases.
Comprehensive financial planning expert further adds that credit cards for damaged credit enable you to benefit from greater financial protection than you’d enjoy from just using your debit card. If the goods don’t turn up, they turn out to be faulty or the company you buy from goes into liquidation, you’re able to get a refund. This is because the issuer is jointly liable with the supplier.
Advantages of Instant Approval Bad Credit Credit Cards
Fix bad credit scores. An unsecured or secured instant decision credit card is an affective way to rebuild credit. Use less than 30% of the allocated credit limit each month and settle the full balance within the designated grace period for a higher credit score. This will help to increase the likelihood of approval for mainstream, loans, mortgages and cards in the future.
No credit scoring. Most lenders perform a credit check to assess the risk of a would-be customer defaulting on the agreement. Bad rating credit cards are offered to people without the need for credit scoring which dramatically increases the likelihood of creditor acceptance.
Make reservations. Credit cards for people with bad credit can be used to reserve a hotel room or book a car in for repair. A lot of merchants will only accept a customer who is able to provide a card as they are then guaranteed to receive payment.
Undetectable. A credit card for poor credit looks and works in exactly the same way as a normal card. Unless an expert in adverse credit financial products, it isn’t possible to tell the difference.
Emergency situations. It is always useful to have a charge card in case a genuine financial emergency crops-up. Just don’t use a poor credit card for frivolous purposes.
Disadvantages of Instant Approval Bad Credit Credit Cards
Interest and charges. Due to the high customer default rate, the rate of interest and charges are usually a lot higher. Jo Thornill, of Financial Mail, stated that: “Providers, which include Barclaycard, Capital One, SAV Credit and Vanquis, have a reputation for extremely high interest charges, often between 35% and 40%.” Others apply up-front charges.
Low credit limit. Unsecured cards typically have a low limit so they are only suitable for small purchases. Provided that all repayments have been made punctually, most lenders will review this after a period of 6 months.
Loss of collateral. A secured bad credit credit card means that the customer will need to provide collateral, such as property or cash deposit, to benefit from a higher credit limit. Default will lead to any collateral being sold to clear the outstanding balance.
Personal debt. Instant approval bad credit credit cards make it easy to get caught-up in the trap of impulse buying. It takes just seconds to spend money, but a lot longer to pay it off. People with financial difficulties, should identify solutions to credit card debt before borrowing money.
Are Credit Cards for People with Bad Credit Advisable?
It isn’t the fact that instant approval bad credit cards are inherently bad, it is the way they are managed that creates the problem. A credit card for bad credit provides a source of credit repair help, but it can also lead to personal debt problems. If unable to effectively manage personal finances, it could be argued that a bad credit rating credit card could be counterproductive. There is no substitute for exhibiting self-control and discipline when using a credit facility.
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