Your credit history is like a set of footprints in the snow – it leaves a trail behind you. Imagine a small set of neat footprints that represent a responsible financial history, and then imagine bad credit decisions marked out by erratic and large footprints. These two sets of prints (or credit histories, if you prefer) will look very different to you and to anyone else who sees them. When it comes to your credit history you will find your ability to get credit in the future will depend on how responsible you have been in the past. This holds true regardless of whether you have actually filed for bankruptcy.
However, you can still find sources of credit if you look in the right places. Some lenders focus on this section of the market when offering loans and credit cards. You simply have to find them and compare them in order to have the opportunity to prove you are able to handle the responsibility of having credit extended to you at this point in time. Fortunately, there are a number of ways you can do this.
Is Your Credit History Correct?
It is essential to regularly check your credit report(s). Mistakes can be made but they cannot be corrected if you are unaware of them. If you know you have a poor financial history, make sure you take this step before you look for lines of credit and get any discrepancies on your credit report(s) corrected.
Types of Credit Cards
There are basically 3 types of credit cards you can consider when trying to rebuild your credit:
- Secured Credit Card: While most can get approved for this type of card, a deposit is required. The advantage of the secured credit card for an individual with poor credit is that most companies report regularly to the major credit bureaus to help you reestablish your credit.
- Prepaid Credit Card: While it is not a true credit card, it carries a major credit card brand and can be used like a credit card. You simply must transfer money to the card and you are limited to that amount. There is generally also a fee associated with purchasing a prepaid card.
- Unsecured Credit Card: Generally reserved for people with credit scores above 650 and they do not require a deposit but have varying interest rates based on your credit history.
Finding the Best Rates
If your credit history is poor, look for lenders who provide credit cards and loans to people like you. The interest rates on such cards and loans will be higher than if you had a good credit history. However, the rates shown on websites and advertising material are typical rates. Regardless of your credit history, this means you will be assessed as an individual and given a rate that reflects your financial situation. You may get a rate that is less or more than the typical APR shown. When you are shopping around for these credit cards or loans, make sure you compare the typical APRs offered so you get the best possible deal. You may be given a lower credit limit than you would if you had a good credit rating, but it may be raised later if you handle the initial limit responsibly by paying your balance in full each month. The same information regarding APRs also applies if you need a loan. Check the typical interest rate over a year and see what you would pay in interest on the loan. Comparing loans could save a considerable amount over the loan period.
As you can see, you can still get credit if you have a bad credit history or have even declared bankruptcy at some point in the past. Just remember it pays to do more research when you need this form of credit. Lenders will not be as keen to lend to you as they would be to someone with a good credit history. Do your homework and find the companies that will provide credit cards or loans to people with bad credit. Once you have a shortlist you can find the best rates and save money on your new line of credit.
In the end, responsibility will determine whether you make the most of your new credit line or not. If you pay the required amount at the required time, you will be able to start rebuilding your credit history for the better, regardless of the lender you choose.
This is a guest blog post contribution by Evelyn Robinson.