Credit Cards for Bad Credit Borrowers
It may seem like your financial life is over after you've experienced problems with debt and credit. After all, that's the common thought that goes around after you've encountered some hiccups, whether it's minor, like missing a single payment, or major, such as declaring bankruptcy. While it may take some time to get on level credit ground after you've encountered some issues, it's not the death knell that prevents you from getting new credit cards like you may assume.
Secured Credit Cards
Secured credit cards are your easiest option, as the bank is taking a zero risk approach to providing you with credit in this situation. This is due to the fact that you provide a certain amount for collateral to the issuing bank. They hold this in a savings account that is tied to the credit card and provides you with the credit limit for the card. This way, you build credit, but the bank isn't out any money if you don't make payments. Other than the savings account, this type of card functions exactly the same as a standard credit card. Some companies also graduate you to a full, unsecured credit card once you've made enough payments on time on the card. You may also be able to increase your credit limit by adding more to the savings account associated with the card. Pay special attention to the fees and other expenses associated with holding the card. You want as low fee a card as possible, especially since you are putting up your own money for collateral.
Second Chance Credit Cards
Some credit card companies specialize in providing unsecured credit cards on a second chance basis, particularly after bankruptcies. Companies such as Credit One have special card lines like the Earn More Credit Fast card that have higher rates and fees, but they do offer entirely unsecured cards for people who can't take the secured credit card option. These bad credit cards often transition to other, better cards that the company offers, giving you access to points or cash back over time. On-time payments are also rewarded with credit limit increases and other incentives, which are important as these cards also often start out with incredibly low limits to minimize the risk to the company.
Credit Union Credit Cards
Sometimes, talking directly to an underwriter or loan officer is the way to go, but it's often difficult to manage this at a larger bank. A credit union, on the other hand, tends to be more invested in individual members and may be willing to work with you on rebuilding your credit. Some credit unions have lower requirements for credit scores before issuing a credit card, especially if there were mitigating circumstances surrounding your credit problems, such as a divorce or medical bills.
Bad credit doesn't have to mean that you wait seven years for the bad marks to disappear from your credit report. Instead of sitting around and watching credit-requiring life pass you by, get on your rebuilding process by seeking out these credit card options. You won't have to worry about high rates on your car, qualifying for a mortgage and other credit essentials when you sit down and finally start working on your credit score. Once you have a history of on-time payments, your credit score starts to increase so you can build up to full credit cards that make you money when you use them.