The first thing to do before you apply for credit cards for poor credit is to establish whether or not you need to. This may sound strange but in some cases you may be denied access to certain financing due to a mistake on your credit report that wasn’t your fault. The first thing to do is to get your credit report in order to establish your current rating and to find out what types of financial products are available to you. If necessary you can also correct any errors by sending in a dispute with one of the 3 major credit bureaus.
People apply for these kinds of cards for numerous reasons. For example you may be self employed and find it difficult to get credit. The reason lenders are often hesitant is that you don’t have a consistent paycheck like they can get from someone who has a guaranteed income from their salary at the end of the week or the month. For other people it may simply be the case that they have had problems with debt in the past. Having maxed out with other lenders they may have then tried to deal with that problem by taking out another loan. This then unfortunately creates a cycle where people try to deal with one form of debt by paying off with another form of debt.
The problem with this approach is that eventually you may find it a lot harder to loan any capital from any lender. While credit cards for poor credit may have higher interest rates than regular, unsecured credit cards, you are also more likely to accepted when you apply for a secured credit card. If possible you should check with a debt consolidation company to see if you can consolidate your debts into one source rather than having to pay off numerous lenders every month.
Before you apply you need to carefully consider all of your options. It is often a topic which people find difficult and embarrassing to discuss, however, there are debt helplines, financial advisers and other forms of financial advice available that exist to help you look at all the options available to you as a consumer. Some people panic and run to loan sharks, without realizing they are both illegal and can charge enormous interest rates, far beyond that of the original loan.
One benefit of credit cards for poor credit is that they often help you restore your credit score over a long period of time. It is important to check with the lender to learn how this works and how long it will take in order to improve your rating (we’ve round the average is 3-6 months). The reason that this is important is that a bad rating can have big consequences in the long term and end up costing you thousands. A low credit score can make it harder to get a mortgage when you want to buy a house. If you need to travel to work and your car breaks down you may find it more difficult to pay the repairs or buy a new vehicle when you credit score is found to be too low to be able to apply for the loan.
This is why it is important to carefully check all small print and details before you apply. Always read the terms and conditions. The biggest detail to be aware of is how much you’re allowed to spend every month and the percentage of interest on the repayment. Never look at the minimum amount and simply pay off the card in full as soon as your bill is posted. You should also look at the very least to try and pay more to reduce the interest in the longer term.
Ideally you should also pay off the amount on the card each month. However we understand that this is not always possible, especially if you have other debts to take care of. You should be aware that if you do not keep up monthly repayments it can have serious consequences on your rating. It’s very easy to get into a situation where the amount of interest and penalties can exceed the maximum you’re allowed to spend for the month.
In some cases you may have no other choice other than to get a secured card. The bank you apply with may ask for a minimum amount as a deposit. This acts as a form of insurance for the lender in case you default on your debts. If anything does go wrong they will at least have some form of payment.
Always check the agreement with the lender as different lenders have different rules when it comes to claiming security deposits. Some will claim them if you miss one repayment while others may wait 5 to 6 months. If you are not sure ask before signing an agreement.
In short when looking for credit cards for poor credit you should not think that you have to accept the first thing that is offered to you. There is a wide array of information available, both in terms of price comparison sites to show you the best deals and personal advice that is more geared to your own individual circumstances. With a smart approach you find a great deal on a secured credit card and break the cycle of debt.
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