Unsecured credit cards for bad credit. Apply, use responsibly, and improve credit rating
Unsecured credit cards for bad credit do not require a cash deposit. They exist to assist people whose credit status prevents them from getting approved for regular credit cards. Given that the approval is less strict than that for traditional credit cards, you stand a fair chance to rebuild your credit once more.
Ordinarily, creditors prefer secured credit cards for the sole reason that holders pay a deposit before opening an account. That precaution works in their favor if you miss monthly payments.
For unsecured cards, the issuing financial institutions charge maintenance fees, penalties, and high rates of interest to offset risk. That way, in the event of defaults, the card companies recoup the lost income through the charges and penalties.
However, you may notice that these cards have some features that distinguish them from others. There are no cash back rewards for utilization, plus you get low lines of credit.
Also, most of these cards place monthly or annual fees an aspect that could pose a challenge. In some cases, the issuing bank grants users little or no grace period to pay back money spent on purchases. What this means is that you begin accumulating interest as you race against time.
At the same time, the pre-qualification process can work to your disadvantage. The hard inquiries affect your credit scores. You should opt for cards where you pre-qualify and avoid altering your scores.
Credit cards are a must-have
According to estimates provided by Experian, there are approximately 30 million citizens with an undesirable credit status. These numbers do not augur well with credit card companies. These firms need to make money, and for them to remain in business, people must use cards to pay for purchases.
Banks and other institutions must ensure that as many people as possible have a card in their possession. As a stopgap measure intended to bridge the gap, many companies have now come out to provide consumers with unsecured credit cards for bad credit.
Since there is no deposit requirement, in most cases, you can continue to enjoy the trappings that come with being able to buy the things you want and paying for them later.
Unsecured credit cards available in the market – a sneak peek
Here is a short review of unsecured credit cards that you can apply for even with bad credit:
Total VISA Unsecured Credit Card
To begin with, the Total VISA Unsecured Credit Card gives you a credit limit of $300. The card has an easy and fast application process. Total Visa reports to the leading credit agencies, i.e.
TransUnion, Experian, and Equifax, hence it’s useful in improving your credit score. Once you get an approval, you need to pay $89 as a processing fee. Also, the card comes with an Annual Percentage Rate of 29.99% for purchases and cash advances.
In the first year, there is a $75 annual fee but this changes to $48 in the subsequent years. You must also be aware that, despite having a $300 credit limit, your available credit is $225 after the card issuer nets off the annual fee.
The card has a monthly servicing fee of $6.25 and late fees of up to $38 for delayed payments. Interest on purchases applies after 21 days from the end of your billing cycle. If you pay the outstanding balance within this period, there is no interest charged on new purchases.
Milestone Unsecured Mastercard
The Milestone Unsecured Mastercard does not require a security deposit. It also reports to the three credit agencies which are an ideal step for rebuilding credit. As a part of the application process, milestone determines your pre-qualification.
If successful, the card issuer recommends the most suitable APR, and annual fees depending on the credit profile. Since it is an unsecured card, you do not pay a deposit, but Milestone starts you off with a $300 credit line.
The card comes with identity theft alert, a feature that helps inform you if anyone is trying to steal your information. However, you do not get to increase your credit limit for the entire period of owning the card. On the other hand, the card company charges high annual fees at $35 at the onset.
The cost increases to $59 then $75 in your first year before settling at $99 in the subsequent years.
As a skilled immigrant, your relocation to the United States presents a doorway to opportunities galore. The CreditStacks Mastercard is an excellent choice considering that you do not have a credit history.
As you are already aware, most credit card issuers will not accept your application without a Social Security Number or a U.S. credit history. You need to provide Visa information, passport details and proof of income.
The credit limit can go up to $5,000, and there is no annual fee or a foreign transaction fee. However, you must apply for the card 60 days in advance before your relocation date. Besides, do not expect to earn rewards on what you spend, but there are a couple of benefits in the form of travel and shopping protection.
Can you get an unsecured credit card with a high limit?
Adverse credit is not a death sentence and does not mean that you cannot get approval for unsecured credit cards. Despite card issuers considering your status when applying for the card, there are things you can do to enhance your chances for access to a higher limit.
First, find out if your bank provides such a facility. The reason for doing so is because you have had a history with the bank. Apart from operating a checking or savings account, you may have secured a car loan or other form of credit in the past. Since card issuers usually carry out background checks, your bank already has sufficient information on your history.
Second, obtain the latest credit report from the three major credit bureaus. As it were, inaccuracies do crop-up, and if not checked in time, they affect your score. You may be surprised to find delinquency in your account. Sometimes, the person updating your report mistakes you for another consumer. Mostly, this happens when someone else has a name that is like yours, or you do share an address.
On the other hand, you might have paid a bill in the past, but the credit bureau went ahead to file it as delinquent. Medical bills have a reputation for credit reporting errors. The only way to find out why you continue being denied credit despite making efforts to improve is by scrutinizing your credit reports. Check thoroughly and confirm that you are not suffering from other people’s mistakes.
Third, avoid having balances all over. Common knowledge among most consumers is that if you have a history of late payments, it will hurt your credit score. Also, high balances in your credit cards have a similar adverse effect. Did you know that having balances spread across several cards still hurts your score? Those small balances you have been ignoring pull you down in the same way as the large ones. With such a reputation, you come off as a borrower that over-extends their credit. Also, lenders view you as someone who does not understand their finances. Moving forward, start paying off all small balances and improve your credit.
Finally, be proactive and request for an increase in your credit limit. Card issuers have a provision for this, and you can take advantage by asking for it at six or twelve months. However, you must be keen to ensure that you maintain a solid reputation for making monthly payments on time and be a regular purchaser. Besides, you can combine your lines of credit on two cards. Many people do not know it, but one can shift a credit limit from one card to the other. For instance, let us assume that you have two cards, and each has a limit of $2,000. You can make card one to have a $500 limit and card two $1,500. Note that doing this does not increase your credit limit, but it helps reduce the utilization ratio on your most preferred card.
Truthfulness in stating income – an essential prerequisite
While applying for an unsecured credit card, do not be in a rush. You may, naively, understate your income. In almost every card application, you will need to state your earnings before taxes, retirement deductions, and medical insurance.
A high income increases your chances of qualifying for a higher credit line. Report your income accurately and keep it updated. By adopting these measures, card issuers will consider and grant you a credit limit increase.
High credit limits come in handy when you need to make large purchases. Besides, they boost your credit utilization ratio. On the other hand, with a high cap on how much you can spend, the industry perceives you as a borrower who can manage their finances.
Bad credit seems to linger on you like the plague. Credit card companies turn you down at every corner. However, you have not lost everything. You can start by approaching your bank and inquire whether they can get you an unsecured credit card for users with bad credit.
Build your credit by using your unsecured credit card every so often. You do not have to overspend, focus on remaining active. Settling your credit card obligation is the only secret to stay in good standing. Also, keep abreast of your credit score by obtaining and scrutinizing credit reports.
Check for mistakes that cause you to look bad and have them rectified. While making an application for your card, be truthful in making income declarations. Also, look for opportunities to increase your credit limit and utilize them.
Alex is a former budget manager turned entrepreneur. He works mainly at home on his credit score advice website and writes a financial blog on the side. He hopes to expand his business into a full online lending company for bad credit as soon as he gets enough investors.