Reestablishing Your Credit Rating in Troubled Times
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by: barrywaters
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Word Count: 433
Millions of people unexpectedly found themselves without jobs during the economic collapse of 2008 and 2009, due to circumstances totally beyond their control. Due to this sudden loss of income, they were unable to meet their monthly mortgage, loan and credit card obligations. As a result, the number of people filing for bankruptcy protection rose. Those who just a few short months before had the financial ability to buy whatever they desired now were helpless to do anything but watch their good credit rating evaporate.
In years past, bankruptcy would have meant that all purchases would have to be made with cash for at least seven years, rendering big purchases such as appliances and cars pretty much out of reach. For those who want to get back on their feet and reestablish their good credit rating, there now are secured, or bad credit credit cards to help them on their way. However, bad credit credit cards are not intended to fuel an irresponsible lifestyle.
Bad credit credit cards require an upfront deposit and allow a very low credit limit to start. By using the card to make small purchases, an individual can pay the balance off monthly and gradually build their credit rating back up. Then, once a good payment history is established, the lender may gradually increase the credit limit and eventually switch the customer to an unsecured card.
At first glance, bad credit credit cards may seem like the perfect answer, but there is a downside. Some cards charge exorbitant fees in the first billing statement that can eat up the entire credit limit. They will also frequently charge high interest rates that can themselves eat up the credit limit and generate over limit fees and charge interest from the moment of purchase, rather than allowing the usual one month grace period.
Bad credit credit cards can be invaluable to rebuilding your credit rating, providing you do your homework ahead of time. Be sure that your chosen card company reports to all major consumer credit bureaus. Otherwise, all your good intentions will go to naught. And, keep in mind that bad credit credit cards are meant to be a temporary fix to a problem, not the permanent solution. If you can find a card that reports to the major credit bureaus, does not charge unreasonable fees to establish the account or sky high interest rates, and offers a grace period for interest on purchases, then you are well on your way to building your credit history back up.
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Related to student credit cards, preview getsmart.com/credit-cards.
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