Issues for Those with Bad Credit

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Issues for Those with Bad Credit

Having bad credit can be bad enough. It can be the result of poor financial decision-making, or it can be the result of something you can’t control. In any case, fortune is often not on your side and the only way out is to slowly crawl back up.

Should you even get a card?

Credit cards are not just very convenient, but sometimes very helpful in a bind. If you have an emergency, such as being stuck for a few days in a strange locale, a card can be a godsend. Also, they are helpful if you want to build up a good credit history. Further, you may need one in order to rent a car or hotel, or do online buying.

But if these are not an issue for you, can you wait a while before getting a card? This may be a time to devote to building up savings, cutting expenses in your life, and learning to handle your finances. Your daily expenses are best paid for with cash during this stage of your credit-rebuilding. The last thing you want to do is end up in the same boat you were in earlier.

Credit cards are not on favorable terms

Some credit cards target those with bad credit. These cards tend to have very high interest rates, high fees for late payments and going over the credit limit, and a variety of other fees for things like setting up the account, getting a credit limit increase, and simply for having the card (the annual fee). Those who are not careful can find themselves back in the same situation they were in earlier.

Ideally, you want your credit card to report your payment status to the credit bureaus. Some of these cards do not do that; it is important to find out before you get one that it does indeed report to the bureaus. Otherwise, it will not help you rebuild your credit.

You might be tempted to try prepaid credit cards. While they can be useful at times, they do not report to credit bureaus because they are not credit products, so your efforts at building up your credit with these cards will come to nil.

You’re being marketed to by scammers

Scammers target those with bad credit in hopes that they will act out of desperation and without doing the necessary homework. They might promise you a guaranteed loan without checking your credit history or income, and they might charge you a fee to "process" the guaranteed loan—and then they’ll disappear if you actually send the money to them. In reality, it is illegal to promise you money in exchange for a fee.