Using A Credit Card With Bad Credit

While people of all credit score levels can use a credit card to make purchases

, those with poor credit scores may find it difficult to use regular credit cards. Those with poor credit scores may not be able to get approved for a regular card. In this situation, there are a few different types of credit cards that consumers can use to make purchases and to rebuild their credit profiles again.

Secured Credit Cards

One type of card that a consumer can use is a secured card. Secured credit cards have some kind of collateral associated with them. When a consumer open this type of credit card, he is required to put up some kind of deposit to act as the collateral for the account. Then if the debt on the card is not repaid, the company can simply keep the deposit and pay off the debt. For instance, a consumer may be required to put up a $250 deposit for the secured card account. Then the card issuer gives the cardholder a line of credit of $250. Sometimes, the card issuer will double the amount of credit compared to the deposit. These cards can be obtained by almost anyone, regardless of credit. This makes them an ideal solution for individuals who have credit problems due to a bankruptcy or a foreclosure.

Prepaid Credit Cards

Prepaid credit cards are another option for those with bad credit to consider. With prepaid credit cards, individuals can make purchases anywhere that credit cards are accepted just as if they had a regular card. With this type of card, the consumer gives the card issuer a certain amount of money to put on the card. Then the consumer can use that card as if it were a regular card. As purchases are made, they are deducted from the available balance on the card. These cards can come in handy when the consumer needs to make a purchase online or make a reservation at a hotel. The card can still be charged as if it were a regular card, but it does not require the cardholder to have good credit.

Unsecured Cards

In some cases, individuals with questionable credit can still get approved for unsecured credit cards. Typically, right after a bankruptcy, a consumer may not be able to get approved for this type of card. However, after using a secured card for a while, he can then move up to an unsecured card. When the unsecured card is initially issued, it may come with a very low credit limit. For example, it may only have a $500 credit limit. As the consumer proves that he can handle the card, the credit limit may be extended to a higher amount. This makes it possible for the consumer to gain access to credit so that he can begin rebuilding his credit score.

When using any card in this situation, it is important to use it wisely. Credit should be used sparingly instead of just making random purchases at any time. By using the card wisely and then paying off the balances quickly, the consumer can begin to develop a positive payment history with the credit bureaus. This will go a long way towards helping the consumer rebuild his credit history so that he can get approved for financing in the future.

by: Abby Crowhurst

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