You can apply for credit cards with poor credit, although your credit card options may be limited. This does not necessarily mean you will end up with horrifically high interest rates or ridiculous payment terms, but it does mean you may not get the same broad credit card options that someone with a strong credit history would receive.
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Having poor credit can also mean you are vulnerable to a number of scams. If a credit card offer sounds too good to be true, it’s a good idea to read the fine print very carefully to ensure you know what you’re getting into before you sign on the dotted line.
What are my credit card options if I have poor credit?
A common option for those with poor credit is a secured credit card, the Federal Reserve points out. Secured credit cards are those make sure you will pay them off by having you make a security deposit against the amount of credit you will be issued. The security you have to provide is usually a cash deposit into a special bank account. If you are issued $1,000 worth of credit, for instance, you will need to put $1,000 into an account from which payments can be withdrawn if you fail to make them in a timely manner.
Secured credit cards are not the only options for those with poor credit.
Every credit card company reviews applications differently, so a poor credit history may not weigh as heavily in every case. Traditional unsecured credit cards may be available, depending on each company’s stipulations.
Retail credit cards, such as department store credit cards, gas credit cards and hotel credit cards can be more readily available than other types of credit cards. These types of credit cards may come with perks, like discounts at the particular store, hotel, or gas station with which they are affiliated, and may come with less stringent requirements that other types of credit cards.
They can be used at the specific retailer that issued them and sometimes can include other retailers, depending on each particular card. While department store credit cards, gas credit cards, and hotel credit cards cannot be used for all purchases, using any type of credit card wisely and paying off your debts on time can help repair a poor credit rating.
A poor credit rating does not usually happen overnight, and it can take some time to repair it. Paying your bills on time is often the first step to helping repair poor credit, and others are noted by the Federal Trade Commission. Creating and sticking to a budget can be a major help for improving your credit score going forward.
Reviewing your credit report can help by allowing you to make sure the information it contains is accurate. If it is not, writing a letter of dispute to the company that made the inaccurate claim and working with the company to correct it can help remove it from your record if the claim is, in fact, erroneous.
Do companies prey on people with poor credit?
Because people with poor credit have limited credit card options and are frequently in debt, they can make easy targets for unscrupulous companies, warns the Federal Trade Commission.
Warning signs include promises that cannot legally be fulfilled, such as entirely clear your bad credit history with a new social security number and financial background. Other things too look out for are companies that extend large amounts of credit to just about anyone, especially if that credit comes with no questions asked.
Although a credit card offer may look tempting on the surface, you may find several not-so-attractive terms in the credit card holder agreement. These may include very high interest rates, equally high fees for a number of transactions and payment due dates and terms that can be difficult to meet. Fees can include:
- An application fee for filling out an application
- Transaction fees for all purchases
- Cash advances or balance transfers
- Membership fees charged just for holding the credit card, whether you use it or not
- Penalty fees for late payments, going over your credit limit and other penalties
While such fees are not illegal, they can add up quickly. Not being able to meet the terms of the agreement and pay off the credit card debt when due can further mar a credit history and make a poor credit report even poorer.
Doing your research, reading the fine print and finding credit cards that come with reasonable terms you can meet can help get a credit report back intact.
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