It won't be long before the United States finally moves away from using cash to buy things. Every year, more and more Americans buy things online and use new ways to pay. Even now, you can pay almost any bill online or set up automatic payments that happen without you having to do anything. Even though this isn't completely safe yet, the convenience often makes up for any risks. How can someone with bad credit be a part of these new systems?
Most of the time, people with bad credit can't get credit cards with low APRs. As the country as a whole moves into a bad credit area, however, more and more banks are making products for this growing market. There are more and more credit cards for people with bad credit, and the number of people who can get them is growing quickly.
These credit cards for people with bad credit can be a big help, but if they aren't used right, they can do more harm than good. While some people have bad credit as a result of unemployment or illness, most consumers simply manage their finances badly. When bad credit cards are used badly, they can keep a person's credit score low or even make it worse.
You can use bad credit cards in the following ways to improve your credit score:
Monthly Use: Use the credit card to buy at least one thing each month and pay off the whole balance. This gives your account a steady stream of credit reports. Lenders look for this kind of consistency in a good customer.
Keep a small balance. Most financial experts will tell you to pay off your credit card balances as soon as possible, but there are some benefits to keeping a balance. Credit companies like it when customers have a balance, so it makes sense that they might raise your balance if you do. DON'T keep a balance that will make you fall behind on payments because the APR is too high.
Charge less than half of your available credit. The more credit card debt you have, the less likely you are to get credit in the future. A safe point is when all of your open credit accounts add up to less than half of your total available credit limit.
As a customer's credit worthiness changes, it has become common for creditors to sell their accounts to other credit companies. It's possible that this has already happened to you and you just didn't know why. In 2005, Washington Mutual bought a lot of Providian's customers. As a customer gets better at paying their bills on time, they are worth more to many creditors. Some companies that help people with bad credit build up their credit and then sell them to another company do this to make money. This can also be good for the consumer, since the APR on their new account is likely to be better.
It is possible to have such bad credit that even companies that offer credit cards for people with bad credit won't give you one. Once this point is reached, which could be through bankruptcy, the only options left are debit cards and prepaid credit cards. Most of the time, debit cards work the same as credit cards when making a purchase, and they can't cause more credit problems. Prepaid cards work just like credit cards, but you have to put money on the account before you can use the card.
With all of these choices, there is something out there for everyone who wants to take part in the modern economy. Even the worst credit history can be fixed with careful work over time.
