Credit cards can be vital to function today, whether it be to book a hotel room or rent a vehicle. Don’t despair if your credit is less-than-perfect and you have had trouble getting a credit card. Many cards are geared for people with bad credit.
When looking for a credit card for less-than-perfect credit, the important thing is to do your research beforehand and not to apply for every card, as it can lower your credit score. Don’t worry if your credit isn’t perfect because credit card lenders look at more than just your credit history. You can improve your chances at qualifying by having a steady income and long time residency.
If you have less-than-perfect credit, you will generally have two options for cards:
Secured credit cards
You must make a deposit in a savings account with the bank that issues the secured credit card in order to use it. The deposit is used as collateral for your card. The amount that you need to deposit varies with the program, but generally if you deposit $300, you would have a credit limit of $300. You can increase your credit limit by depositing more money.
Some secured credit cards may offer a slightly higher credit limit than what is in the collateral savings account. As you keep the account in good standing, the credit line will go up. If you default on the card, the bank will use the money in the account to pay the balance of the card.
Secured credit cards work exactly the same as regular credit cards except for the deposit. Banks may or may not report these cards to credit bureaus, so check with cards you are considering. If you are trying to rebuild your credit, you will want the information reported to boost your score. Your money will also earn interest while it is in the collateral savings account.
Unsecured credit cards
Unsecured credit cards do not require any deposit and work as a typical credit card. Credit lines are generally low to begin, sometimes only $200, but will rise as you keep the card in good standing. These cards will have higher interest rates and fees than other standard credit cards. The agencies usually report to credit bureaus, but check to make sure your information is being reported so you can help improve your score.