Following the flush economic times during the 90s, almost everyone got bit in the wallet, coming in to the 21st century. As a result, there are now lots of people looking for a credit card for people with bad credit. Due to the size of this new market, bankers and other lenders have come up with just such a product. I suspect that if they didn’t address this need, they would have few customers left! The mission of any bank is to make money, duh.
So now, the banks have devised a new model of credit card, for people with bad credit. Granted, you’ll probably have to accept a higher APR than you’d like and won’t get the credit limit you might have formerly enjoyed. However, those APRs and credit limits can vary substantially, depending on the ‘points’ you accrue on the application. For example, if you have both a checking and savings account which you’ve kept in good shape – no overdrafts and regular deposits to your savings account, with few withdrawals – you’ll pick up a few points on their risk-factor evaluation.
How about your assets? Do you own your car, or are you still paying on a car loan? Owning your car is another plus, so long as it’s a fairly recent model. Your payment history does weigh heavily in the banker’s decision making process. If you’ve got a few late payments glaring out from your credit report, but you have a legitimate explanation, such as a major medical crises, or temporary job loss, don’t hesitate to tell the loan officer how this affected your ability to make timely payments and what you’ve done to correct the situation. Keep in mind that the loan officer wants to give you a line of credit and start collecting some interest, which goes right into the bank’s coffers, as profit. With the credit card for people with bad credit, it’s usually only a question of how much it will cost you and how big your line of credit will be.
If your credit history is really bad, you might get turned down. Before you apply for the credit card for people with bad credit, get a copy of your credit report. You’ll want to clean up any entries that don’t belong to you and pay off other debts you’ve overlooked or defaulted on first. You may find several small debts like this. Your best strategy here is to correct and eliminate as many bad marks as possible, before applying for the credit card for people with bad credit. Once you submit your application, this information appears on your credit report. If you get turned down, this lowers your credit score. Creditors view this application and turn-down to be indicative of a desperate consumer, obviously living beyond their means.
If your application is approved, be sure to read all of the fine print of the terms. If you don’t, you may get a surprise letter from the bank, letting you know your APR has just risen another 4%, along with a $75 penalty fee for one late payment! This is no way to restore your credit rating. Whatever you do, be sure that payment is made on time and that you don’t exceed your credit limit.
If you take good care of this financial opportunity, you can ask the bank to review your account in six months and possibly get a reduction in the APR as well as a higher limit. After all, that bank doesn’t want to lose your business to a more flexible competitor.
Use the credit card for people with bad credit to your advantage. Stick with just the one card until your credit rating improves. Then you’re well on your way to a credit card with friendlier, more manageable terms. Good for you!