If you know you have bad credit, credit card applications may seem to be out of reach. For those who dont realize they have damaged credit, the first reaction to a denial of an application may be anger.
There was a time not many years ago when a late payment or two on credit cards was not a big deal. That is not the case today and one late payment in a years time can damage your credit rating.
Years ago you could call your lender and tell him your payment would be two days late and any fees would be waived. That doesnt happen today and the fees for late payment are high. In addition, some lenders arbitrarily change due dates monthly and may even impose a time limit of 5 pm for payments to be considered timely on the due date.
The predatory practices of profit hungry credit card companies are the reason new laws limiting their activities were passed. Unfortunately, the laws did not take effect for over a year after passage. That provided a window of time for credit lenders to position consumer accounts for the new restrictions.
As a result, many financially responsible consumers have found they have a bad credit rating now because credit lines were reduced and interest rates increased on their accounts. You may have paid double the minimum payment due in the past but found that amount due tripled due to a huge increase in APR. What you might not have known is that paying only the minimum due each month puts you in a higher risk category in the view of credit rating bureaus.
Making Application for a Credit Card with Bad Credit
There is nothing to be gained in making multiple credit card applications to lenders such as Chase or CitiBank in an attempt to find a lender who will accept your application. You will be denied and each denial of an application will add another black mark to your credit file.
Instead, consider the option of applying for a secured credit card. There are a few regional and specialty banks that feature such credit accounts and advertise them as a method of rebuilding damaged credit.
Read all of the fine print of such offers to eliminate banks that have exorbitant fees such as monthly insurance charged to the card. Be certain the lender is one who reports monthly to credit agencies and check the reputation of the lender with an online search for comments posted by customers of the bank.
How to Make Application
If you have bad credit, credit card applications available to you are limited. You need only apply for one secured account as almost all applications are accepted. You will be required to place an amount of money in a savings account held by the issuing lender to provide collateral for your credit card balance.
Some secured lenders allow you to choose an amount between $300 and $1000 to open your new account while others will limit the amount that can be used. Although a few secured cards will carry a credit line identical to the amount of cash you deposit, most will provide a credit limit that is a percentage of the cash paid.
How a Secured Card Application Affects Your Credit
Credit ratings bureaus do not give the same weight to a secured account as they do to a standard credit card. Although it does take one to two years of using a secured credit card to rebuild your credit, this credit account does carry benefits for you.
By providing a positive comment by the lender month after month, the secured card places positive credit results above the bad credit in your file. If your new card allows you to change the account to non-secured after establishing a good record with the lender you will have a good chance of applying for and receiving a new standard credit card from a major bank with more favorable fees and APR.
For those with bad credit, credit card applications may seem out of reach. Applying for a secured credit card with a smaller bank may offer the best option to rebuild damage credit.