If you have a bad credit history borrowing money can be difficult. However if you choose a special credit card for low credit score you can not only secure credit, but start rebuilding your track record. Here’s what to look out for.
Applying for a credit card with low credit to your history can be a dispiriting experience. Time after time, you’ll draw a blank.
After years of indulging our appetite for borrowing, the party is well and truly over and banks are increasingly cautious.
So, if you have poor credit, what should you do?
Do you need the credit?
The first point of action is to look at your finances and try to decide whether borrowing is right for you, could you cut back your spending elsewhere to save money or is a loan or credit card your only option?
You also need to look at your own track record.
A credit card company might decline you because of various factors – not just a low credit score, but also low income or unstable income.
If you’re self-employed, for example, it can be additionally difficult to get a card.
Their risk assessment will have determined that you will be unable to make the repayments and therefore represent an unstable risk. So, it’s worth thinking if they’re right – a credit card may not be the best option.
Rebuilding your credit score
That said, a credit card can be useful as a tool for rebuilding your credit score.
If you borrow a little bit each month and then pay it off you’ll gradually improve your score until you can access better rate.
Finding a low credit rating credit card
Once you’ve decided that you need a credit card, the next stage is to find the right one.
There are a number of credit cards specifically tailored to people with poor credit. They’ve noticed that there is a growing number of people who, for various reasons, have had problems in the past which affect their chances of accessing credit in the present. Despite all this they still represent a reasonably good bet.
The most obvious difference with the credit cards is that they offer a significantly higher interest rate. You’ll typically find yourself paying around 30% interest rate plus.
Naturally, this makes it somewhat more expensive and you’ll have to manage your finances effectively. The most important thing to remember is to clear your balance every month.
This will enable you to keep building up your score and keep you out of trouble. If a balance builds you can quickly find yourself struggling to make payments – and of course if you should miss one, your credit rating will deteriorate even further.
How to find the best credit card for low credit rating
There are many good credit cards for low credit score out there on the market, but likewise there are a couple of rotters as well.
People often make bad choices through the feeling that they have little choice, the important thing to remember here is that you do. This is a growing market and there are more players here than you might think.
Look for cards which have a low or no annual fee or try to find a low payment credit card for bad credit, which will minimize your monthly outgoings. The big drawback of this, of course, will be that it will take longer to pay off your balance if you stick to this minimum amount.
The one thing to remember is not to panic and see this as the start of a process of rebuilding your score.
Low credit score cards should be seen as the beginning point – a place where you can start your journey back. All being well, after a few years, you’ll be able to access much better credit card services and interest rates.