How to work on bad credit scores?
If your credit score is bad you need to follow a robust strategy to improve your credit. You should make the effort to learn about credit and how to use credit cards so that once your credit score is fixed it never goes down again. Improving your FICO credit score includes fixing the things that are hurting your credit. The next step is to apply for a credit card that is made for low credit scores or a secured credit card. Once you have a card make sure you pay all your bills on time and keep your balances low. This will move quickly toward good credit.
#1. Secured credit cards
A secured credit card requires a deposit of a certain amount of money into a savings account. Your credit limit depends on the percentage of the deposited amount. This deposit works as collateral for the lenders. Moreover, you cannot use these funds to make other regular payments.
Benefits of secured credit cards for people with bad credit:
- Easier approval as risk for the lender is less
- Lower APR in comparison to the most unsecured cards for bad credit
Drawbacks of secured credit cards for people with bad credit:
- Needs a high-security deposit
- Low credit limits, which make it difficult to maintain a low utilization ratio
#2. Unsecured credit cards
Most credit cards are unsecured credit cards. An unsecured credit card requires no deposit. It simply works on the basis of revolving credit.
Revolving credit is basically a line of credit where the customer needs to pay a commitment fee to achieve credit limit. The customer can use this credit limit when it is needed.
Benefits of unsecured credit cards for people with bad credit:
- Higher credit limits
- No security deposit
Drawbacks of unsecured credit cards for people with bad credit:
- High annual fees
- High-interest rates
- Monthly maintenance fees
Other things to consider before choosing your credit card
Whenever you apply for any of these cards, make sure to consider these factors too.
- Fees – Some issuers may or may not charge annual fees both secured and unsecured cards. However, there are some that may even charge monthly service fees on top of an annual fee. You also need to consider various other fees such as maintenance fees, application fees, transaction fees, and penalty fees. Pay close attention to all of these fees to know your total cost.
- Rates – Interest rates on secured as well as non-secured credit cards can vary significantly and can be either fixed or variable. Make sure to pay the full balance each month. This will help you avoid any interest and will help maximize the credit card rewards.
Best Credit Cards for Bad Credit
To find the best credit cards for bad credit, we researched many secured and unsecured credit cards. None of these cards is perfect for every consumer. Each card caters to different financial situations and spending habits. Here are some of the cards that can help you improve your bad credit score.
- Discover it Secured Credit Card
- Capital One Platinum Credit Card
- Capital One Secured Mastercard
- SDFCU Savings Secured Visa Platinum Card
- First National Bank Secured Visa Card