Credit cards, in general, fall into two major categories: secured and unsecured credit cards. And both can be used to build and rebuild credit.
The difference between secured and unsecured credit cards
Secured credit cards are credit cards that require a security deposit. They can also be called guaranteed approval credit cards because many of the issuing banks don’t do a credit check. As long as you can put down the security deposit, they will approve you.
The difference between these two types of credit cards is that unsecured credit card issuers will pull a credit report and they will issue a credit card based on your credit score. A security deposit is NOT required with an unsecured credit card!
Types of unsecured credit cards
There are a LOT of unsecured credit cards on the market. You can find several different types:
- reward credit cards (travel/hotel/specialty )
- cashback credit cards
- retail credit cards
- gas credit cards
Each credit card issuer will have its own program with its own requirements for approval. Many of the above types of credit cards will require good to excellent credit in order to be approved.
Caution: Apply at your own risk!
Many of our clients need to rebuild their credit and do a lot of damage TRYING to rebuild their credit using one of these cards. They get turned down. Start feeling frustrated, and worse, they have now damaged their credit even more by applying for credit with lenders that don’t approve bad credit!
One of the first things I do when I sit down with a client is to explain to them how their credit score is created. I make sure they know what a hard inquiry can do to their credit report. And why applying for credit cards that won’t approve them is not only a waste of time. I let them know that hard inquiries can damage their credit score and they MUST always read the fine print!
What are Unsecured Credit Cards for bad credit?
As its name implies, unsecured credit cards for bad credit are a type of unsecured credit card that is issued by “subprime” lenders. These are lenders that will give people with less than stellar credit a chance to rebuild their credit scores by using one of their cards.
These unsecured credit cards tend to have small initial credit limits. Usually, $300 – $500. When they issue these cards, they will immediately put all their fees on the card. So you can pay them off over time. These fees are generally around $150 – $250.
Some of my clients are upset over having a bill right away. They don’t want to be charged a processing fee. I then advise them to check out a secured credit card. Secured credit cards will generally not have any processing fees.
But the reason Some cards provide unsecured credit cards for consumers with average credit. However, to make up for the risk, these cards may come with higher interest rates or additional charges.
Try to search for unsecured credit cards online and you’ll see a wide selection of cards from different banks and issuers. Usually, credit cards with rewards programs are unsecured credit cards that demand good or excellent credit.
How to get approved for unsecured credit cards for good credit
So you have bad credit right now. You can use the unsecured credit cards for bad credit on this site to start rebuilding your credit. Here are a few tips to help you get a higher credit score.
One way is to stop spending and use your finances to pay off your debts. Rebuilding credit or raising a poor credit score can’t be done in a done. You may need at least 6 months up to a year of consistent payments to your creditors before you can achieve the ideal credit rating.
See to it that your creditors report your payments to major credit bureaus regularly. It is also a good idea to check your credit report at least twice a year to make sure that all the records are accurate.
After working on your credit score, you should be able to qualify for an unsecured credit card without difficulty. However, once approved, you need to pay close attention on how you use your unsecured credit card for your expenses.
Although unsecured cards often have higher credit lines, be careful about maximizing your limit. To keep you credit rating in good shape and to avoid bad credit, experts recommended not using more than 40% of your allotted credit.