Can You Live Without One?
Credit cards are an essential part of life in today's economy. Unfortunately, not everyone has a perfect financial history and as a result may have a diminished rating, This can make life quite difficult for people to obtain something that is not only a useful tool to have in the financial arsenal, but in some cases an essential part of daily life. If you have bad credit or as many people find out to their cost- no credit history at all, there are several options available for you. Before you consider applying for a new card, you will want to weigh all options to make sure that you choose an option that is going to work for you even though you have limited choice
Secured Credit Cards
A secured card can be an effective way to improve your history while giving you access to a modest line of credit. Typically, this type of account is opened after you provide a security deposit of between $200 and $500 to a participating credit card company. Your available line of credit will likely equal the amount of money you have put down, minus any applicable fees.
Before opening a secured credit card account, you should check to make sure that the bank you are dealing with reports to the three major credit bureaus. The three bureaus that are registered with the Federal Deposit Insurance Corporation (FDIC) are:
Experian: ( experian.com.)
TransUnion: ( transunion.com.)
Not all secured cards are reported to these agencies but if you select one that is, and you operate it responsibly, the end result is that your rating will be improved through using it.
Cards for High-Risk Customers
There are a select few companies that have options for individuals with poor or no credit. These cards come with a higher interest rate and an annual fee that can account for half of an account holder's available credit. You can expect to have a lower limit with one of these cards, but they are handy for a small line of emergency funding without having to put down a deposit.
Generally, cards that target those with poor credit are not ideal for regular use, given the higher interest rates and fees. Should you opt to open this type of an account, it is best to use it sparingly and pay off the balance monthly. Carrying a high balance will only add to any current debt that you hold, and you may see your credit score drop as a result.
Pre-Paid Debit Cards
You may be looking for something simply to shop online or purchase airline tickets. If this is the case, you don't need a credit card at all. A pre-paid debit option might be the ideal choice for you. Unlike a credit card, the pre-paid version will allow you to shop without racking up more debt. These are accepted wherever credit cards are accepted, but your purchases are paid for with the money that you have previously deposited into the account. Some will allow you to deposit your paycheck directly into your account every payday.
One drawback to pre-paid is that you may have to pay an additional monthly fee in addition to ATM fees and other bank fees. It is always a good idea to research the various pre-paid debit card companies to make sure that you are getting the best deal without spending a small fortune in hidden fees. It is also important to remember that these accounts are not reported to the major credit bureaus, so a pre-paid card will not help you to restore your credit score.
Repairing Your Credit Rating
You don't have to panic if you have poor history. Some may consider it a strange approach but the main way of getting your credit rating back is to take out more of the same. In time and with responsible use and smart spending, your credit status can bounce back and remain in good order as long as you continue to treat your