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If you are struggling from bad credit history, you’ll be glad to know that you can now use a credit card to improve it. How can a bad credit credit card be a tool in rebuilding credit history?
Bad Credit Credit Cards – Tools for Credit Rehabilitation
There are two types of credit cards for bad credit – prepaid credit cards and secured credit cards. Both of these cards offer instant approval even for people with bad credit history. Let’s discus the differences between these two types of bad credit credit card.
What Is a Prepaid Credit Card?
In the past, prepaid credit cards are used solely for payment. Some people don’t like to use prepaid cards because they do not provide a credit line. You can only use the card if you have existing funds in your account. When the funds run out, you need to make a new deposit to be able to use your card.
Today, these same cards can actually be used in establishing and rebuilding credit. In response to the market’s need, issuers of prepaid cards have provisioned credit reporting to the major credit bureaus. This way, prepaid cardholders who can’t qualify for a regular credit card now have the chance to raise a low credit score.
What Is a Secured Credit Card?
A secured credit card is just like a regular credit card. However, the cardholder must first deposit cash in his/her account to get approved. The security deposit ranges from $300 to $1,000. The amount of deposit will also determine the value of the cardholder’s credit limit.
As expected secured cards often have more expensive interest rates and fees than standard credit cards. This is why it is very important to pay off your balance in full and on time to avoid incurring the additional charges.
Use Your Prepaid or Secured Card to Improve Credit
It is important to remember that not all secured cards and prepaid cards report to the major credit bureaus. If you really want to boost your credit score, you need to make sure that your payments will be promptly reported to the bureaus. After 6 months or so, order a copy of your report from the three bureaus to see if you’re making progress.
Once your credit rating has improved, ask your credit card issuer for an upgrade to an unsecured account so you can enjoy lower interest rates and higher credit limit. If you’re using a prepaid card, you can now apply for a regular credit card to enjoy a credit line, more flexibility and more privileges.
About the Author
Melanie Mathis is a credit analyst and a writer for 8 years. She has been participating in the programs of NHBS, Inc such as their continuous effort in giving out Free Credit Repair and Building Ebook. NHBS also has a list of recommended Bad Credit Loans.
Copyright 2010
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