3.9 What are credit cards for bad credit?

A.k.a

• Credit cards for people with bad credit
• Credit cards for bad credit histories
• Bad credit credit cards
• Poor credit rating credit cards
• Credit building credit cards 
   

If you have a bad credit rating you will find it hard to get a normal credit card.

When lenders process your credit application they will look at your credit report to see how you have handled past credit facilities.

If you have never had a credit facility, such as a loan, credit card, contract telephone or overdraft facility, you will have a ‘bad’ credit rating because lenders will not be able to assess how good you are at paying back debt. You will therefore be considered as high risk.

On the other hand, if you have had credit card facilities in the past, but regularly paid bills late or not at all, you too will have a bad credit rating.

However, there are credit card providers who recognise that some people may have improved their behaviour with credit facilities and therefore now need to build up a credit rating. Plus, they will be aware that there are some people new to credit who are caught in a catch 22 situation - they can’t get credit because they have no credit history, but they need credit to get a credit history.

These credit card providers will issue credit cards to people in the above situations but will charge a higher rate of interest for doing so to reflect the higher risk involved.

Interest rates for bad credit credit cards typically start at around 34.9% APR so they don’t really class as a sensible way to borrow money in the long term.

If the cardholder used their bad credit credit card regularly to pay for everyday items such as fuel or food shopping, and then paid the bill off in full at the end of each month, the user would start to build up their credit rating.

In the long run, this would potentially lead to the possibility of getting a standard credit card with a lower interest rate.

Credit building cards don’t generally come with an annual fee and offer the cardholder the opportunity to make purchases online and over the phone. The credit limit may not be particularly large to begin with but sometimes this can go up after a few months if the card issuer is happy with your behaviour on the account.

Credit cards for bad credit are ideal for people who have past credit problems over 12 months old, those new to credit and the self employed.

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