Unfortunately, not everyone's credit history is good. Sometimes – quite often, actually – bad credit happens. It may have come as a result of major mistakes you made when you were younger and didn't fully understand the responsibilities and repercussions of credit use, or it might have arisen from unexpected expenses that quickly got out of hand. But, regardless of how or why your credit went sour, you may now be trying to reclaim your financial name and reputation but finding it rather hard to do so.

Once your credit has gone bad, most financial institutions become quite hesitant about granting you any new lines of credit. You're now considered a high risk. The only way to change this perception is to prove to them that you're still responsible enough to handle a credit account. Of course, you may be wondering how you do that if they'll no longer give you an account in the first place. The answer is to find yourself a bad-credit credit card. As the name implies, these cards are designed specifically for people with bad credit.

There are two basic types of bad-credit credit cards. The first is a secured credit card. Secured cards are those that have money (your money) backing them up, which means that you'll have to set up a bank account and deposit funds to secure the card. While this may sound just like a debit- or ATM card attached to and drawing from a regular checking account, it's not. Although you must have money behind the card, your transactions are still run through the normal credit-card system and therefore the credit companies see them as such. If you continue to you pay on time the amount necessary on your monthly statement, a positive credit history will be established for that account. The longer you your bad-credit credit card wisely, the more your credit score will move in the right direction.

The second type of bad-credit credit card is actually just an everyday unsecured credit card, but one that carries a very limited credit line (no more than $200 to $300 or so) and a very high interest rate. These cards operate exactly like regular cards because they are – there's absolutely no other difference. The rationale on the part of the issuing credit card companies is that if they're going to trust you (remember, you're a high-risk case in their eyes) with their money, then they're going to be paid an additional amount for the risk they're taking by way of higher interest. Therefore, be very careful if you choose this type of card, because the interest you'll be charged can get out of hand before you know it. Of course, this is not to say that these cards should automatically be avoided. Just make sure that you use them responsibly – and for the sole purpose of rebuilding your credit. After all, if you use the card and pay off all your charges at the end of each month, you generally won't have to worry about the interest rate at all.

View all 3 of your FREE Credit Scores

blog comments powered by Disqus