When you have poor credit or no credit at all, obtaining a credit card can be difficult. However, a credit card can help you rebuild a bad credit score as well as establish a credit history, so it's beneficial to have at least one on hand. But finding one that will approve you or give you a decent interest rate can be tricky. If your score is particularly low, you may be denied a card altogether or you may be locked it at an exorbitantly high interest rate.
Luckily, there are a number of options available for those looking to build or rebuild their credit. A few cards or options to consider include:
A prepaid credit card works the same way as a credit card, but instead of purchasing items on credit and making monthly payments, the funds from prepaid cards are directly loaded onto your card. If you try to make a purchase and don't have enough funds, your purchase will be denied.
Prepaid cards are also a smart choice if you have difficulty controlling their spending. Because you can only use available funds, you won't go into debt with this type of card.
Like prepaid credit cards, secured credit cards work like any other credit card at the cash registers. However, a secured credit card requires a deposit, usually from $100 to $500. The deposit serves as the credit limit and covers the debt in the event the owner can't make his or her payments.
This type of card is also advantageous because the credit limit will begin to increase without an additional deposit you consistently make payments on time and don't go over the limit.
Some credit cards will allow you to use a cosigner. A cosigner is a person with good credit that shares liability for the debts incurred. In the event the card owner does not make payments, the cosigner then becomes responsible for paying the debts.
Weigh the pros and cons carefully before asking someone to be a cosigner. If you are late on a payment, the cosigner's credit score also suffers. If you do use a cosigner, set limits and guidelines beforehand to control spending and ensure payments are made on time.
If you're trying to rebuild your credit, it's important to establish smart credit habits. Before you take on any new debt, remember to keep these things in mind:
Poor or no credit doesn't mean you can't obtain a credit card; in fact, a credit card can help you raise your score if you make your payments on time. While there are a number of options for those who are dealing with credit issues, a little research will help you find the right card for you.