Bad credit history credit cards provide access to credit for those who don't qualify for mainstream financial products due to missed and late payments, delinquent accounts or bankruptcy. Many lenders won't deal with customers who have adverse credit due to the risk of future default, but there is now a growing base of specialist providers. Unsecured, secured and prepaid credit cards work in the same way to traditional cards, although the rate of interest and charges will be higher to underwrite the risk. Provided the balance is settled in full each month, the majority of these costs can be easily avoided.
Unsecured Bad Credit History Credit Cards Help to Repair Credit
An unsecured low credit score credit card will only offer a low credit limit, but settling the full balance punctually each month will help to improve credit scores. This is because lenders report to the leading credit reference agencies (Experian, Equifax and TransUnion) at the end of the month. Although serious credit transgressions will take a long time to recover from, it is possible to recover from minor defaults in as little as six months. Adverse credit isn't a terminal condition which means that credit cards for poor credit may mean that a consumer becomes eligible for mainstream financial products relatively quickly.
Guaranteed Low Credit Score Prepaid Credit Cards
A prepaid card works differently to credit cards for poor credit because there is no credit limit. Instead, the customer will load a card with his/her own money. It works in the same way as a conventional card, but helps that person to avoid financial difficulties. The use of personal money means that no interest will be accrued, but there is a fee for taking out and loading the card. Prepaid card providers do not report to credit reference agencies because there is no credit limit.
Secured Bad Credit Rating Credit Cards
Whilst an unsecured bad credit history credit card will have a number of restrictions, the provision of collateral means guaranteed acceptance and a higher credit limit. A secured credit card involves the consumer providing either cash or an asset to protect lender interests in the event of default. The lender will report to credit reference agencies at month end.
Benefits of Bad Credit History Credit Cards
A credit card for poor credit provides more than just a way to pay for goods and services and make reservations, they are an excellent way to repair credit. Whilst the APR and charges will be higher, making punctual repayment means that the borrower will become eligible for mainstream financial products in as little as six months. The cost of borrowing can be reduced by securing debt with cash or collateral. Those who experience difficulty managing their finances and have previously got into serious debt may find that a prepaid credit cards is the better option. However, there will be reporting to credit reference agencies.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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