Little-known credit card boosts your credit

Credit Cards for People With Credit Problems

By Jason Steele

JUNE 25, 2014

Nobody is perfect, and good people can have credit problems because of past mistakes, or due to no fault of their own. For example, people who have large medical expenses not covered by insurance, or those who are have been divorced often face problems with their credit.

Thankfully, there are credit cards that are still offered to applicants with fair credit, and having a credit card can help cardholders rebuild their credit scores over time.

Types of credit cards for people with credit problems

The paradox of having credit problems is that you can’t improve your credit score until you are offered a line of credit, and no one will let you open an account unless you have good credit. The way out of that paradox is a product known as a secured card.

Secured cards are credit cards that require cardholders to first submit a security deposit as a condition of opening the account. With many of these products, the amount of the security deposit becomes the account’s credit limit, while others extend cardholders some credit beyond that amount.

The BankAmericard Secured Card offers a credit line of $300 to $4,900, depending on the security deposit offered. The Wells Fargo Secured card allows cardholders to deposit as much as $10,000.

Either way, cardholders must make monthly payments on their purchases and can incur interest charges when they carry a balance.

The benefit of these cards is that they report payments to all of the major consumer credit bureaus, which helps to improve the credit scores of those who make their payments on time.

To receive a secured credit card, applicants must have discharged any bankruptcies and be able to verify their identity. After that, they are virtually assured of being accepted.

Moving beyond secured cards

Once a cardholder has held a secured card for at least a year, they may be able to be approved for a standard, non secured card, to help them overcome credit problems.

There are some standard cards that are easier to receive. Applicants transitioning from secured cards should avoid travel reward cards and other high end products marketed toward those with excellent credit.

For example, applicants can apply for a student card, whether or not they happen to be attending school. Other cards to consider should be simple cards marketed toward those with “good” rather than “excellent” credit.

What to avoid

When searching for a credit card, those with a troubled credit history should be careful to avoid the least competitive products in this market.

The cards to avoid are ones that require a monthly fee and others that have no grace period. Without a grace period, cardholders are immediately accruing interest on all of their charges, even if they pay their statement balances in full and on time as a way to avoid credit problems.

America is a land of second chances, and those who have had problems with their credit can quickly improve their scores by finding new credit cards and using them responsibly.