How Bad Credit Credit Cards Can Help You Establish a Positive Credit Profile
There are two types of people who will likely be viewed as a credit risk to most credit issuers: those who have a bad credit past and those who have no credit past. Fortunately for these people, bad credit credit cards can help them build a positive credit history and have a brighter credit future.
The first type of people who would benefit from a bad credit credit card, are those who have never had credit. Nowadays, in the credit world you are guilty until proven innocent and can show that you will pay back debts before you are allowed unsecured, prime credit cards or a home/car loan. The most common way to do this (and a good way for banks to make a buck off of you while evaluating your credit worthiness) is to get a bad credit card. A bad credit credit card is where you send the bank a security deposit and they will send you a credit card with a limit equal to your deposit.
If you do not default, you will get the security deposit from your bad credit card back, get an unsecured credit card, and maybe even collect interest off of your security deposit. On the flip side, your bad credit card may carry an annual fee, a monthly maintenance fee, late fees, and interest if you do not pay the card in full every month. You can raise your credit limit on your bad credit credit card at any time, to help your overall utilization and show that you can be responsible with larger credit lines, by sending in an additional deposit.
The next type of people who would benefit from a bad credit credit card, are those with a bad credit history. These individuals are not always truly credit worthy people and may have just encountered an unfortunate life circumstance that was financially disabling. These circumstances are usually unforeseeable and out of the consumers hands. Once these people get everything back on track, they are likely to be as good a risk as any prime-rate consumer.
A bad credit card is a great way for these people to show that they can be trusted by creditors. People who have had a bankruptcy can usually get a bad credit credit card within just a few months. Once you get at least a 6-month positive history using your bad credit card, you can usually begin to get other unsecured credit cards from semi-prime banks. Within a year, you may even move up to prime banks thanks to your bad credit credit card.
If sending in $200-$10,000 for a bad credit card is not your cup of tea, there is another type of bad credit credit card that charges $200-$250 worth of fees on a $300 credit limit. The upside of this type of poor credit card is that you will get the card without paying a dime in advance. The downside of this type of bad credit credit card is that you will have to pay down the $200-$250 in fees in order to use the credit limit.
Bad credit can seem like a dirty word, but, truthfully, it can affect almost anyone. Whether it be a simple late payment that holds you back for a year or a bankruptcy that forces you to start from square one, it is always possible to dig out from under all of the debt one step at a time -- beginning with a bad credit credit card.
