Getting a Credit Card with a Bad Credit Rating
Paying with plastic has become a common part of everyday life, with more people now using credit or debit cards than cash for day to day purchases. The rapid rise of online shopping means that it’s almost essential to have some way of paying by card, but people with poor credit ratings have always struggled to get approved for credit cards. It’s not impossible though, and there are ways for people with even the most impaired credit histories to enjoy the convenience of plastic.
People with mild credit problems or low incomes will probably not be approved for the most heavily advertised credit cards with the most attractive offers, but many companies operate a policy known as Risk Based Pricing. This basically means that their cards will offer a different interest rate depending on the credit score of the applicant. If your credit rating isn’t good enough to be accepted for the card you apply for, you may be offered a different card with similar features but a higher interest rate.
Risk based pricing is a great way for people with some adverse credit history to get a card, but people with more severe problems will need to look elsewhere. Several companies offer a card specifically aimed at people with poor or no credit history, and market them as a ‘first’ or ‘starter’ card. The idea is to offer a card with a low credit limit and a comparatively high interest rate, as a way of allowing people to being to develop some positive history on their files.
While these cards are poor value in comparison to more mainstream offers, the acceptance rate is very high and by opening an account and keeping up with your repayments, your credit rating will slowly be improved to the point where you may be able to apply for a cheaper card further down the line.
People with more severe credit problems such as bad debt or a previous bankruptcy may find that even these starter cards are out of their reach, which leaves only one real option : prepaid cards. These cards, also known as secured cards, are not in fact credit cards at all as they need to be ‘loaded’ with funds before you can use them to spend.
After you’ve credited money to your account, the card can be used like any other Mastercard or Visa, with the important difference that you can only spend money that you have in your account – you can’t build up a debt. This means that there is very little risk for the card issuer, and so acceptance is virtually guaranteed. The flipside is that the issuer doesn’t earn money by charging interest on your balance, and so they instead impose a variety of different charges on the cardholder ranging from a small percentage of everything you spend using the card to a monthly or yearly administration fee. You may also be charged a considerable sum for even applying for the card, so shop around and check the small print carefully before signing up.
To sum up, no one would deny that a bad credit rating makes it harder to get a credit card or other plastic payment solution, but with a little searching, there are cards of some kind available for nearly everyone.
Nicholas Hunt
http://www.articlesbase.com/credit-articles/getting-a-credit-card-with-a-bad-credit-rating-37625.html
Would getting an extra credit card and not use it increase my credit rating?
I currently have a credit card for which the balance is 0 and that I don’t use. I have had credit problems in the past and I’m trying to not use it to raise my rating. Should I just stick to this one card I already have, not use it and keep the balance at 0$ to raise my credit rating up?
No you need to be paying the interest for it to register on your creit rating – a client buying a house thought he would raise his rating by haveing lots of cards yet paying them off before the interest was due – no red marks etc…he was wrong and it did not register at all.
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you need to carry a small balance less than 50% of your credit available and make regular payments over the minimum due.
regular reponsible use, is what improves credit.
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Actually, it would help you increase your credit. It will show that you are able to get credit but you don’t abuse it by using it too much. I have couple of credit cards that I got few years back and now I don’t use them. It builds credit history which is part of your credit score. I think it’s a good idea to get another card. You can also use it for emergency. Maybe the site below will help you find a card.
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http://www.CreditCardAisle.com
Getting another card, using it LIGHTLY, and paying if off each month is the best way to raise your credit. Here is why:
There are five areas that go to make up your score, and they are weighted differently – some areas are more important than others and have a bigger effect on hurting or improving your FICO score:
1. Payment History = 35%
2. Amounts Owed = 30%
3. Length of Credit History = 15%
4. New Credit = 10%
5. Types of Credit Used = 10%
So, the 10 best things you can do for raising credit scores are:
KEEPING A CLEAN PAYMENT HISTORY
1. Pay on time. At 35%, payment history is the largest area of concern to lenders. The only thing that will damage your score more than late payment is total non-payment.
2. Did I mention pay on time?
AMOUNT OWED – NOT TOO MUCH (BUT NOT TOO LITTLE)
3. Ideally keep your debt to credit ratio to 30% or less. This means only using 30% of your available credit per card.For example, if you have a card with a credit limit of $1,000, keep the balance at $300 or less.
4. This holds true per individual card but also for your debt to credit ratio overall. ANOTHER CARD GIVES YOU MORE AVAILABLE CREDIT, BUT NEVER LET YOUR DEBT GET ABOVE 30% ON ANY SINGLE CARD, OR ON ALL CARDS COLLECTIVELY.
LENGTH OF CREDIT HISTORY
5. A longer average account age will boost your score. This means that opening new accounts can lower your score because a new account will bring down the average age.
6. Point 5 above has a rider – if you have poor credit you need to re-establish your credit and rebuild your credit. This means taking a hit in the short term by applying for as much new credit as you can get so that in the long term your score will improve.
NEW CREDIT DOs AND DON’Ts
7. Don’t constantly apply for new credit. If you are shopping around for credit, try to squeeze the applications into a short time frame. FICO scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur. If you are just starting out building your credit, a lot of inquiries will lower your score more than someone with a longer history.
8. Do request a copy of yor credit report regularly. Requesting a copy of your own credit report does NOT damage your credit score. This is an Internet myth. Requesting your own credit report or credit score from an authorized provider does not set off alarm bells the way that multiple requests sometimes does.
TYPES OF CREDIT USED
9. Mix it up. A combination of revolving credit such as credit cards and installment payments like a car loan is ideal.
10. Avoid store cards such as Target, Home Depot and so on. These count as lines of credit as opposed to revolving credit like regular credit cards. Store cards are not given much respect by credit scorers. In the long run, the convenience or in-store discounts will not make up for being refused a VISA card or a prime mortgage rate later on down the track.
References :
http://www.credit-cards-comparisons.com/how-to-raise-credit-scores.html