People get sick. Jobs come and go. The roof leaks. Life happens, and sometimes that means you end up with a low credit score.
Credit cards for people with bad credit can make a big difference when you’re getting your finances back in shape. Here are some reasons you might want to consider applying for a bad credit credit card.
1. Applying for lots of credit cards hurts your score.
Every time you apply for a credit card, your score slips about five points. If your score is high, five points is just a blip. But if your score is low — anything below 630 is considered bad credit — you can’t afford to do anything that causes it to go down even further. So if you’ve been applying for the best credit cards out there without success, stop now. Get realistic and apply for a card that’s geared toward people in your situation. The card issuers will be more sympathetic to your plight, and you won’t keep bringing your score down even further by applying for cards without getting approved. And don’t worry — when your score improves, you’ll be able to apply for any card you want.
2. You’re responsible, but you need a chance to prove it.
The best credit cards for people with poor credit are often secured cards. With secured cards, you pay the card issuer a refundable deposit so they feel more confident you’ll pay back what you borrow. Getting a secured credit card gives you a chance to build up a positive credit history. To take advantage of the opportunity, make sure you pay on time, every time, and keep your overall balances as low as possible, and definitely below 30% of your available credit at all times during the month.
3. They’re not necessarily a bad deal.
It’s true — many financial products for people with few options have high, exploitative fees, like payday loans and some prepaid debit cards. But many of have annual fees comparable to other credit cards, and the Credit CARD Act of 2009 prevents credit card companies from jacking up the fees higher than 25% of your credit limit in the first year you have the card.
4. Bad credit credit cards build your score — debit cards don’t.
It’s pretty hard to get through life without plastic these days, so many people with poor credit (or even no credit history at all) get a prepaid debit card. While these are useful, they don’t report to the credit bureaus, so they don’t build your score and you’re never able to move up to a better card. Choose an option that will bring your score up if at all possible.
A good credit score makes it easier to find a place to live, get a job and get insurance — all things that will improve your sense of security and your quality of life. Make this the last credit card for poor credit you ever apply for. Use it as a tool for rebuilding your credit, and put good financial habits in place to ensure you’re never in this position again.