Many people are being held back from their goals like Rent Own Homes, Auto loans, Student loans, etc., simply because their credit score doesn’t look good. The higher your Credit Score, the lower the interest rate and down payment you can get on your Loan, and you will be quickly approved for a loan if you have good credit standing. Even employers nowadays look into their applicants’ credit scores! Credit score says a lot about us and credit cards.
What does poor credit mean?
Poor credit showcases that you are either an unreliable borrower or have no credit history. Getting a standard credit card can be quite a hassle for those with no credit history or low credit score. Fortunately, a secured credit card can help you establish and improve your credit score in such cases. Unlike standard credit cards, which are unsecured debt, secured cards are issued against fixed deposits (FD). The maximum credit limit of a secured credit card online is equal to the value of the fixed deposit held by the bank. This deposit covers the card issuer from any defaults made by the cardholder, and the cardholder also receives interest on the deposit. Due to the reduced risk to the card issuer, secured cards are issued to people with bad credit score and others who do not qualify for the standard credit cards.
How to get rid of a poor credit score?
A secured credit card is the most straightforward credit card to get in case of a poor credit score. In the case of a secured credit card, you have to either submit a security deposit or avail of a credit card against your fixed deposit or savings account. The security deposit is equal primarily to the credit limit you want. Although sometimes security deposits can be less than 100 percent but will be in the range of 70%-100%. Another kind of credit card you can obtain with a poor credit score is an add-on credit card. If someone in your family has a good credit history and a credit card, you can request them to add you as an authorized add-on to the credit card. You will get an add-on credit card whose expenses will be added to the main card’s bill.
Why is it so difficult to get a credit card to build credit?
Credit cannot be gathered without a credit history. But have no fear, there are solutions! You have good options or wrong options. Bad options include applying for a credit card from what is known as a subprime lender. They will issue you a credit card with a credit limit of a few hundred dollars but charge you about half in fees. These shitty lenders are Merrick Bank, First Premier Bank, and Credit One Bank. And there are others. Credit limits will be low, and almost all charge annual fees, monthly fees, online account management fees, and more.
For someone with poor credit, what is the best credit card?
Discover, and Capital One are excellent options, as they have no annual fee. If your credit is terrible (below 500), try the Open Sky from Visa since there is no credit check, although it does charge an annual fee. Pay off your balance on the card by using the card at most once per month. By doing this, you’ll steadily build good credit. If you sign up with Discover, your account is usually reviewed at the 8-month mark to see if you’ve paid on time, and if so, you’ll receive your deposit back and get an unsecured credit card with a higher limit.
What’s the easiest way to get more credit on your credit card?
You can build your credit score with credit cards and loans (Secure and unsecured loans).
Tips to increase credit score with credit cards.
1. Before using a credit score, you must check your free credit score.
2. Pay Your Bills on Time
3. Don’t Increase credit card utilization, USE 30% of the credit cards
4. Don’t Apply for Too Much New Credit, Resulting in Multiple Inquiries
If anyone doesn’t have a credit score and newly has credit cards, they have to wait 3-4 months to generate the score from credit bureaus.
How can having a Credit Card make you poor?
It depends on your spending habits and not on the credit card. The amount we revolve for the next few months would accrue some interest. So if you are lured by this power and begin spending too much, you will eventually run into debt. Certain spending habits lead to debt, and recognizing these habits early could save you from being poor, such as—
1. Spending More Money Than You Make – If you are spending money on products that you don’t need, you will spend more than your fixed income. Keep your spending within your monthly income/budget so that you don’t deplete your savings or max out your credit cards, eventually turning into debts.
2. Using Debt to Pay off Debt – You’re not paying off anything when the involvement of a credit card is used to pay off other cards and loans. Instead, the debt is just being shuffled around, and more debt is being incurred each time this is done.
All this, in conclusion, does not mean that you shouldn’t use a credit card. It just means that you should use it wisely. Because while spending, we don’t realize that sooner or later we have to pay this bill. It merely keeps accumulating and does not go away.
Frequently Asked Questions
1) Does cancel and opening a credit card negatively affect your credit score?
Canceling and opening new credit cards can sometimes affect your score negatively. This most affects your credit age which is 15% of your score. Your credit age is the average age of all your revolving accounts (credit cards). So, for example, if you have a 10-year-old credit card in good standing and decide to close it, that ten years isn’t factored into your credit age anymore. If you open a brand-new credit card account, it factors in your total credit age, bringing it down.
2) Will unused credit cards hurt my credit score if they’re not canceled? Is there a maximum number of credit cards for a good credit score?
Simply having more credit card accounts will result in a higher credit score—at the end of the sentence. The longer answer is that some credit scoring models may treat accounts that haven’t been used for an extended period as “inactive” accounts (and treat them as though they are “closed” accounts for credit scoring purposes). Aside from that, you can expect that card issuers will eventually close accounts if they remain inactive for a long enough period.
