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Tuesday, April 10, 2018

Can You Get a Credit Card When You Have Bad Credit

The very words ‘bad credit’ can fill you with dread and bring with them a lot of baggage and preconceptions. You might expect that anybody with a bad credit score is instantly in trouble and won’t be able to make any big moves in life, such as buying a car, moving house, beginning their very own business, and so on. While there’s no doubt that it is a lot tougher for people with bad credit to obtain further credit through personal loans and credit cards, it is not impossible, and shouldn’t be seen as shackles around your feet. By understanding what bad credit is and how to improve your score, you can play the right moves and get yourself into a better financial situation.

How Do You Get a Bad Credit Score?
There are said to be over 300 factors that can affect your credit score negatively, but you can drive yourself paranoid or crazy if you try to work them all out and try to live exclusively by those rules. Fortunately, there are a few well-known and easy-to-monitor big factors that you can follow, including paying your bills on time.

35% of your credit score is based on your payment history. That’s over a third of your credit score, and all you have to do to keep it on a level is to make sure you don’t forget to pay your bills on time. Sometimes that is easier said than done, but if you’re looking to get another credit card, you need to start being consistent and better organized, or you are unlikely to get further credit.

The ultimate no-no is failing to pay your bills to the point where your account gets charged off, which is when the creditors believe you can no longer pay and take the credit out of your hands. This is hugely detrimental to your chances of getting any further finance as it destroys your credit score and tells any potential card providers that they cannot trust you with credit.

Becoming on friendly terms with the local debt collection agency is a way of killing off your chances of further credit and is extremely demeaning. Creditors will send debt collectors to your house to seize assets worth up to the amount of the outstanding debt. Understandably, this can crush your score and if you have a partner or family can create tensions between you, especially if they have been left in the dark regarding your financial woes.

It’s not just credit card debts that can get you in trouble. In recent times, homeowners have found the economic downturn harder than expected, and many have missed mortgage payments. Some families have had their homes repossessed due to missed payments, leading to their credit scores dropping considerably.

Failing to pay loans off in time and filing for bankruptcy are also big hitters when it comes to getting a bad score. These can be difficult to come back from with creditors, and it’s likely that you will need a face-to-face meeting to stand any chance of being given further credit cards once you have headed down this road.

How Can You Improve a Bad Credit Score?
Fortunately for people with a poor credit rating, it is not a black hole of despair with no escape. There are a number of ways you can achieve your goal of improving your credit rating, and eventually, apply for a new credit card and it not affecting your credit score.

In time, if you pay your bills on time, you will find that your credit score will begin to improve. If it’s a few months (and a few penalties down the line), it won’t give the impression that you are capable of paying off another card, and you are likely to be turned down as a result. Paying a bill even one month late can see your credit rate dropping anywhere between 100-300 points.

The best way to improve your credit score is to keep your existing balances as low as possible and be consistent with your payments. Doing so will showcase your ability to balance your cards and stabilize your finances, which in turn will go a long way to restoring trust in you as a borrower.

A common misconception is that having one credit card that you pay off in full every month is the best course of action for maintaining an excellent credit score. In truth, it can drive it down due to a calculation called ‘utilization’ that works out the percentage of your available credit that is being used. For example, if you have one card with a $1000 limit and you have a balance of $100, your utilization percentage is 10%. This means you can have more than one card and have less utilization as long as you monitor your balances.

It’s always a good idea to monitor your score as you keep paying off your debts, but be mindful of companies that want to sign you up for services for the privilege. Ask around before you choose a credit score rating tracker. It will come in handy and will be a welcome boost to your confidence when you see the improvements you’re making.

What are Your Credit Card Options?
Once you are aware of your bad credit and what you can do to improve your score, you can now weigh up your options to as which credit cards you can apply for, and which ones you are more likely to get. There are two options here: secured and unsecured credit cards.

Secured cards are often used by newcomers to the credit market and people who are just starting to come back from bad credit and have some money stashed away that they can use to get better deals on their credit cards. Those who don’t have a great deal of funds at their disposal often go down the unsecured credit card route as they are known to have attractive benefits at lower expenses.

Secured credit cards from the major banks and lenders often require a deposit that needs to be paid upfront, and many of these cards will have high interest and annual fees attached that can become troublesome if you are transferring debt or likely to be putting a lot of money on the card. The advantage of a secured credit card is that virtually every retail store accepts them, but it might be a little trickier to get your hands on one if you have bad credit. It is highly likely that any balance transfers will be hit with a large interest percentage, too.

Unsecured credit cards might be a good option for people with a poor credit rating who might not be able to pay the big deposits and interest rates on the balance transfers, and don’t want the hassle of going to the big banks and risk being turned down. Fortunately, unsecured cards often have no deposit attached, which in turn can make them an attractive option for homeowners who are struggling to make payments and people without the funds readily available. Another major benefit is that creditors will be unable to take security deposit away from you because you wouldn’t have paid for one in the first place.

For further details on how you can get an unsecured credit card with no deposit, view here and see if it’s something you feel you should apply for.

Most experts recommend that, if your credit score allows it, go with an unsecured credit card from the beginning. However, if you’re not in the position to do so, you can take out a secured card first of all and then transfer. Most lenders will allow you to do so after the first 12 months.

The Key to All of This is ‘Do Your Research’
There are financial experts, websites, and helplines for people who are in debt or who have a poor credit rating. For example, the Money Saving Expert eligibility tool is great for checking whether or not you are right for secured and unsecured credit cards, based on clicking on the options provided. It’s easy to follow and will give you a push in the right direction without the need to apply blind and risk being turned down.

It’s a solid idea to do plenty of research before you take the plunge into something that you might regret later. Be patient, do your homework and don’t be afraid to ask questions you might think are obvious or stupid. Like a doctor, people in the finance sector have heard these questions a million times before, and they’ll hear them many times after you’ve walked out the door.

Once you have weighed up your options and know which route you decide to go down in regards to choosing a credit card, always make sure that you read all of the terms and conditions so that you know exactly where you stand in terms of penalties, early-payment rewards, cancellations, and transfers, etc. You want to be one hundred percent sure the card is going to work out well for you and hopefully help to improve your credit score.

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