A Guide to Bad Credit Credit Cards
Choosing the Right Card for People With Adverse Credit
Sep 11, 2009
People who have had money problems in the past may have problems getting approval for new financial products. Getting into these kinds of difficulties can result in an impaired or "bad" credit rating. This can simply make it extremely difficult to take out new products such as standard credit cards. Bad credit products may be an alternative.
What is Bad Credit?
Whenever a consumer takes out a financial account or a product such as a loan, mortgage or credit card this (and how they manage their account) will be listed on their credit record. This record is widely used by lenders to assess risk. So, when an individual applies for a new product or account the lender will look to see how they may have managed their money in the past.
People who make all their repayments as they should and who don't get into financial problems will generally have a good credit rating. Those who run into problems will be seen as having a bad rating. Problems that can turn up on a record include:
- Missing payments or making late payments.
- Some debt management solutions such as IVAs and bankruptcy.
- Debt related court action such as CCJs (County Court Judgments).
These factors act as warning signs that the individual may be a higher lending risk. This doesn't always mean that the individual can't get any finance. They may simply need to go to lenders who will approve their application.
What are Bad Credit Credit Cards?
If an individual wants to apply for a card then their financial track record will be looked at. If they have an adverse history then standard card companies may turn down their applications. There are some companies, however, who are more willing to give out a credit card even to those to have bad credit and some who specialise in this sector. These are generally known as bad credit credit cards.
What Are the Advantages and Disadvantages of Bad Credit Cards?
Like any kind of financial product these cards come with a range of pros and cons. Consumers would be wise to think carefully about these before deciding to make an application. The advantages include:
- Individuals can get a credit card even with an impaired credit history.
- In some cases they may not have to go through a stringent credit check to get approval for a card.
- Managed correctly, these cards can help build a better credit history over time.
There are also some disadvantages that need to be considered:
- The interest rates charged on these cards can be a lot higher than those given on standard products.
- Not all card companies willing to give cards to those with bad credit will approve every application and may turn down people who have had particular issues in the past.
- People with ongoing debt problems may get further into difficulties with card spending and high interest charges.
Some individuals simply find that a bad credit credit card is their only option in this sector. Making sure not to get further into debt and avoiding the addition of high interest can make this a workable solution for some. Consumers may benefit by looking at an online credit card interest rate comparison site first before choosing which card to apply for.
It may not be the best solution, however, for those looking to take control of existing debts. In those cases a specific balance transfer deal or a longer term debt management solution may be better options to take.
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