Many of us experience a life event that can cause our credit score to plummet. It could be the loss of a job, a bankruptcy, a foreclosure or a medical emergency. There are a variety of life events that can bring about financial hardships and cause our credit score to drop from excellent to fair or poor.
Here at LowCards, we typically classify credit quality into five main categories:
- Excellent Credit: Excellent credit is typically classified as a credit score between 750 and 850.
- Good Credit: Good credit ranges between 700 and 749.
- Fair Credit: Fair credit is usually a credit score between 640 and 699.
- Poor/Bad Credit: Poor or bad credit ranges between 350 and 639.
- No Credit: No credit simply means you have no credit history.
In this article, we will examine the types of credit cards that typically fall into the lower three categories of credit--those consumers who are viewed as more risky by credit card companies.
Why Get A Credit Card To Rebuild Credit?
The easiest way to rebuild credit is by showing that you are responsible in the use of credit provided to you. For many people, one of the best ways to build a credit history is to properly manage a credit card account.
There are actually three different types of credit cards that are widely utilized by individuals with lower credit. Over time, these cards can all help rebuild your credit profile.
Secured Credit Cards
Secured credit cards are cards designed for those with bad credit that require the cardholder to make a deposit to secure a credit line. For example, if you wish to have a $500 credit line, you would have to deposit $500 to the card issuer to be afforded that line of credit.
While this may sound more like a debit card than a credit card, the main difference is that a number of these cards report to the major credit bureaus. This means that by being responsible, paying on time and not over-utilizing your card, you can help build your credit profile.
Repair Credit Cards
"Repair" credit cards are a whole subcategory that exists designed for those with poor credit. These cards are conventional credit cards. However, they often come with high fees and high APR's to allow the bank to offer these types of cards to individuals who present a higher risk to the bank.
Like a conventional credit card, these cards also report to the major credit bureaus. With responsible use, they can help raise a low credit score over time.
Credit Cards through your bank
If you do all your banking with a specific bank, such as Chase, you may have a greater chance of getting a credit card through that financial institution. If you have a good banking history with that bank, they may be more likely to consider offering you the card with a low credit limit to see if you can utilize it responsibly.
Which Card Is Best For Me?
It is difficult to identify which credit card is best for your specific situation. Know that you may have to suffer through a year or more with high APRs and high fees if you have bad credit in order to rebuild your credit score.
If you use these cards wisely, pay in full each month and don't accrue additional fees, you could be well on your way to rebuilding your credit profile.