There are credit cards specifically designed to help you reestablish your good credit rating. Some are issued on a secured basis; others have higher interest rates while others have low credit limits.
A good starting point to learn more is the credit card chaser.
Your goal with these is not to borrow money, but to show you are capable of paying off your debts. This article will explore some of the features of these credit cards.
Can I get a credit card regardless of how bad my credit is?
You can, but if your credit is really bad, it will most likely be a credit card that you secure. In this case, you will be required to make a security deposit, usually between $100 and $500. This will be your credit limit.
How will I benefit from this?
Your activity will be reported to the three credit reporting companies, Experian, TransUnion and Equifax. So long as you make your payments on time, your credit history will gradually improve. Eventually, you may be able to increase your credit limit without making an additional security deposit.
Are there any other advantages?
You will have the convenience of using a credit card, which is a requirement with some vendors. You will also establish or re-establish the self-discipline required to appropriately manage your credit.
Is it possible for me to get an unsecured credit card to rebuild my credit?
It depends on how damaged your credit rating is. You should apply for an unsecured credit card first. You can always get a secured card, but if you can get an unsecured card, you can get a real line of credit, avoid a security deposit, and perhaps repair
your credit sooner.
Are there any fees involved?
Most secured cards have annual credit card fees of about $30-$60. Unsecured cards in this category also have annual fees of similar amounts.
What about interest charges?
They range up to 25%, but this is a question you really don’t want to ask. You should be using these cards to repair your credit. In order to do that, you must pay off your balance every month so you do not incur interest charges. Remember, this is should not be viewed as an extension of credit. It is a demonstration of your ability to manage your debt.
What if I exceed my credit limit?
You won’t be able to. Your card will only be approved for the amount of your credit limit. If you try to exceed your credit limit, it may reflect negatively on your credit score and defeat the purpose of getting the credit card in the first place.
What if I can’t make a payment?
If you fail to make a payment, it will be taken out of your security deposit. That’s why it’s there. It will also further damage your credit rating.
Can I earn interest on my security deposit?
Some credit card companies will pay interest on your security deposit, at market rates, which aren’t very high. Others may not, but the amount involved shouldn’t be a deal breaker.
How long will it take to rebuild my credit?
Depending on how bad your credit rating is, it could take several years. Bear in mind that credit repair is a process, not something that happens overnight. After a few months of timely payments on your secured credit card, the next step is to get an unsecured credit card. You must continue a record of making all your credit card payments on time. Gradually, you will be able to borrow increasing amounts of money.
How is a secured credit card different from a debit card?
The amount that can be spent on a debit card varies with the amount deposited in the underlying bank account. Spending on a secured credit card is fixed at the amount of the security deposit. The history of spending on a debit card is generally not reported to the credit rating agencies, so it will have no effect on your credit rating. FDIC has more information on this.
How do I know I’m getting a good deal?
Don’t pay any application fees. Some credit card companies try to charge as much as $250. Make sure that your transactions are reported to the three credit reporting agencies. Some companies say they will do it, but it is up to you to make sure it is done by examining your credit report. Forbes describes other steps to repair your credit.
Use the credit card chaser to compare credit cards that could help you rebuild your credit.
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