Do lenders who have not processed your credit card applications deject you? When evaluating your application for credit card, the lender mainly looks at two areas - your credit history and credit score. Almost one third of the people have problems of poor credit.
If you have either a poor credit score or poor credit history then your application is rejected. A poor credit history does not mean that you can never have a credit card. There are enough alternatives in the market for people with poor credit history/credit score.
There are adequate amount of small credit card providers that offer credit cards to persons like you with poor credit limit. Also referred as bad debt credit card, these cards are similar to the normal ones save for the interest charges, which is usually high. The bad debt credit card has high interest rates especially because of the risks associated with poor credit rating.
Vanquis Visa card, Centennial Master/Visa card, Aventium Gold Master card, Orchard Bank Classic Master card and the Virgin Prepaid Master card are some of the bad debt credit cards available in the market for people with poor credit history. Most of these cards have enough options that let you improve your credit ratings. You can find certain bad debt credit cards with no annual fees or 0% APR within the first year. Few cards also carry a lot of rewards and bonus points. Check for credit cards to rebuild credit.
Types of bad debt credit cards
Secured bad debt credit cards: This is similar to prepaid credit cards. You need to deposit the amount you wish to spend to the credit card beforehand. For instance, if you wish to withdraw/spend $1500 then you need to deposit $1500 to your lender that issues the credit card. You can use the card for all kinds of credit card purchases, especially in places where only credit card is accepted.
Unsecured bad debt credit cards: This is similar to the normal credit card where the credit card provider extends you credit. However, such unsecured bad debt credit cards have very limited credit limit, usually less than $1000. These cards are the best choice to rebuild your poor credit history.
Both secured bad debt and unsecured bad debt credit cards have their own advantages. An unsecured credit card lets you improve your credit history. These cards usually do not require any deposits and the lender provides you a card with a minimal spending limit. As long as you pay a minimal credit limit each month, and never go beyond your authorized limit, chances are that your credit limit may increase eventually down turning your bad rating.
With secured bad debt credit cards, you decide your credit limit. Whatever you deposit to your secured poor debt credit card goes to your savings account in your name. Similar to savings account, the money you have deposited to your credit card will fetch you interest if maintained over a period. In addition, if your payment history is good, chances are that the concerned bank might extend your credit limit beyond your deposit. In certain cases, the bank may also return your deposit after a period.
In all, bad debt credit cards provide access to people with CCJs, defaults, mortgage arrears, novice users to have a credit card. However, if you ever had a bankruptcy reported, chances of your bad debt credit card approval are very low.
Apart from bad debt credit cards, the other alternatives for people with poor credit history include prepaid cards and joint credit cards. Prepaid card is similar to secured card wherein you deposit the money you need to spend/withdraw earlier. However, these are not suitable for improving your credit rating.
You can have a joint credit card, if any of your family members has a credit card with better credit history. This is ideal for improving your bad credit history. However, joint credit card has its own risk since there is a joint responsibility. Any late or missed payment will affect all the account holders irrespective of the concerned person's mistake.