Don't Fall For A Scheme When Trying To Rebuild Your Credit
History
For people with weak or bad credit, getting approved for a
credit card can be difficult, if not impossible. There are
several credit card options that are aimed specifically at
people who have bad credit and are trying to rebuild or repair
it. There are also, unfortunately, a lot of schemes to take
advantage of the desperation to get a credit card when no one
else will issue one. How do you tell which options are valid
ones and which are just taking advantage of a bad situation?
Let's take a look at some the things that you should be wary of
below.
Catalog Clubs Disguised As "Credit Cards" For People With Bad
Credit
Some supposed credit cards offer to help people rebuild bad
credit by establishing credit cards to be used only with their
catalogs. Products in the catalogs are often overpriced, and you
can't use the "credit card" anywhere else. The catalog companies
may make reports to credit bureaus with your balance and payment
history. This will help to establish new good credit, but it can
be a very expensive way to acquire goods and improve your
creditscores.
Prepaid "Credit Cards" To Help People Repair Bad
Credit.
Technically, prepaid credit cards are not credit cards, though
they may bear a Visa or MasterCard logo. They're more like a
debit card, without a bank account. The purchaser "loads" the
card with a deposit, usually with a minimum of $20 and a maximum
of $500 to $5000. When you use the credit card to make a
purchase, the amount of the purchase is deducted from your
balance. When the balance reaches $0, you can't use the card
until it is reloaded.
Generally, you can reload the card at any time, though there is
usually an upper limit to the amount of cash that the card can
carry at any one time.
Since you are pre-paying on the card, you are not borrowing
money from a company and therefore are not creating a credit
history.
Secured Credit Card - The Best Option For People With Bad
Credit.
A secured credit card is one of the best options for people who
have been declined for a standard credit card. Your approval for
credit is contingent upon a deposit in the credit card company's
bank. Your initial credit limit is usually the amount of your
deposit. In effect, your deposit is security for the credit card
limit. As you make payments on time, the credit card company may
increase your credit limit to 150% or 200% of your security
deposit.
This is unlike a prepaid card, where you are actually spending
your own money. When you make a purchase, with a secured credit
card you are buying on credit and reestablishing your credit
history. The security deposit is only taken if you default on
payments. Be sure to check around for the best interest rates,
as they can vary widely.
You will be faced with many options as you are trying to rebuild
your credit history, and unfortunately, many people have found
ways to take advantage of those people who are tying to turn
over a new credit "leaf." Don't let that happen to you
Thoroughly research each of your options before making a
decision.