Having a bad-credit score can lead to bad-debt and bigger problems, using a bad-credit credit card can help you fix your score.
People resorting to payday lenders shows that many are unable to access conventional forms of credit. Payday loans, which typically have the highest legally possible APRs, can be the only way for those with a poor credit rating to borrow money.
If you are in this situation, or if you have just had a credit-card application turned down, it’s vital to try to rebuild your credit rating as quickly as possible. Once you have done so, you can successfully apply for more affordable kinds of credit.
One of the best ways to improve your credit rating is to use a bad-credit credit card. These types of cards are specifically designed for those who cannot get a conventional credit card because they have a poor credit score.
Improve your credit score
There is a way, however, to get out of this vicious cycle. You can quickly (within a matter of months) improve your credit rating by using a bad-credit credit card responsibly.
These cards usually come with APRs of between 30 and 70%, so they are not a cheap form of credit. The best way to use them is to pay off the balance in full every month. By doing this, you can avoid the need to pay any interest at all.
If you can manage to never miss a payment — or make one late — you will find that your credit score rapidly improves. This is why these cards are often called ‘credit-builder’ cards — they are an effective way to rebuild your credit rating.
Once you have improved your credit score, you will find that it is much easier to obtain credit at reasonable rates of interest.
Online protection with a bad-credit credit card
Buying items online has become a convenient and cost-effective way of shopping. One of the great advantages of using a credit card to buy something online is that you get a much greater degree of protection.
This is because the credit-card provider is jointly liable if the item you buy is not sent or faulty when delivered. You can also make a claim against the credit-card company if the online seller goes out of business and leaves you out of pocket.
County court judgments and credit cards
County court judgments (CCJs) are usually a sign that someone is in real financial difficulty. They are used by banks, credit-card providers, utility companies and others to legally enforce payment of unpaid bills.
A CCJ on your credit record used to mean that obtaining any kind of credit would be impossible for years. Now, though, you can get a bad-credit credit card even if you have been subject to a CCJ.
Not all providers will do this, however, so it’s worth checking the terms and conditions for any card you intend to apply for.
Although bad-credit credit cards can be an enormous help to those with a poor credit score, they do have some potential disadvantages.
The first of these is that the interest rates on offer from providers are quite high. If you can pay off the balance every month, then this is not an issue.
However, anyone who can’t do so will pay a steep price. It’s important, therefore, to ensure that you don’t fall into the trap of only making the minimum payment each month. This will just add to your financial woes.
Another disadvantage of these cards is that they usually don’t come with any of the special offers you might get with conventional cards, such as interest-free periods for transfers or payment holidays.
If you are considering taking out a bad-credit credit card, it’s a good idea to shop around to find the best deal.
The market is becoming more competitive, which means that there are significant differences in the interest rates and other aspects of the various cards available. Taking some time to compare offers could save you a lot of money in the long term.
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