Welcome, Little Guys
If you are unfortunate enough to have allowed your credit rating to dive, either because of some unforetold event that caused great financial ruin or because you were somehow unwise and abused your finances in some way, you are in bad shape financially. Not only do you have bad credit but your credit cards are probably maxed out or very close to it and you find you are unable to pay more than the minimum required payment on them. You may have several bad credit cards and by paying the minimum payment on them, you'll never ever get out of debt.
If you have a good job that pays you regularly, consider yourself very lucky.
There is not going to be a lecture at this point because, hopefully, you have come to the sudden realization that you have royally screwed up your life for a while, financially speaking. So, let's just concentrate on how you are going to re-establish your financial world and gain some integrity and credit again. Ok, I lied. There is going to be a short lecture just to remind you of how you've screwed up your life and put your situation into perspective. It's nothing you haven't thought of yourself so just take your medicine and read this part. There might be something in here that makes you really feel bad about ruining your credit and you know what? You should feel bad about it because it will help you remember that once you get your credit repaired you don't want to go through this again. So, my demeaning attitude is not so much to make you feel like a louse but to help you remember so you won't repeat the lesson.
If you are expecting your credit repair to occur overnight, like your credit crash did, you are hunting up the wrong tree, my friend, because re-establishing your credit, and your integrity, unfortunately, takes a long time. If you're willing to find some patience and set aside some of that greed and that "got to have it now" attitude, we may be able to get you back on the road to normalcy. If you're intent on continuing your greedy and stupid ways, just click the X at the top right of this screen because we cannot help you.
Still here? Ok, then let's get started. You simply have to learn how to exist on only cash for at least the next 5 to 7 years. Yep, that's a long time but things could be worse. You managed to put yourself in this mess and you'll manage to get yourself out of it if you're mature enough and have the resolve to get it done. If you don't even have a job, again, you're barking up the wrong tree. The first thing you've got to do is get a job and establish some kind of income. Without an income, there's simply no reason to have credit at all, so go out and find the best job you can find and (here's a big secret) stay on that job for AT LEAST a year. It would be preferable that you stayed on the job longer than a year but if you stay a minimum of at least one year, it doesn't look too bad on your credit report. No matter how you do it, even if your boss is a total ass, if your coworkers are assholes and are hard to get along with…no matter what, you need to persevere for one entire year. How? Well, maybe the following information will help you a little.
Your Job
When you look for a job, don't just try to find something that will keep your head above water. No, look for a job that you think you'd really enjoy, even if it's not the greatest paying job in the world. Get in there, learn the basics of the job and then, once you've established yourself as being dependable (because I know you'll be at the job every day on time and you'll never call in sick unless you really are; and, you'll stay at least 15 to 30 minutes longer than you have to at the end of the day, right?) you can then start finding ways to save the owner money and verbalize them to your manager or the owner him/herself. If you do these simple little things, you'll start getting raises, albeit small ones, and you'll get to where you actually enjoy your job because people will look up to you and the "job" will become something that you can at least tolerate. Make your job your own. Try to find something exciting or at least interesting within your job and try to get along with everyone for at least one year. The more you work, the less you'll be out throwing your money away on frivolous crap that you don't need anyway. I'm trying to be realistic here.
You've GOT to quit spending frivolously or you'll never get your credit repaired. Got it? Again, I have to say it: if you're going to continue your old ways, just close your computer and delete this site because it's not going to do you any good. So, work more and play less…at least for now. One day soon, you'll be able to start spending some money again but for now, during your credit repair phase, you need to control your spending and get that income up above the outgoing expense level. When you accomplish this, it is a huge milestone in your financial life. It means that you are living within your means and that, my friend, is the beginning of prosperity for you.
Alright, let's talk about how you can get a credit card despite that horrendous credit rating you've got.
Credit Card for Poor Credit Risks
So, what, exactly, is a credit card for people with poor credit ratings? How does it work and why does it exist?
Poor credit credit cards are credit cards that are created for people with bad credit ratings. These cards provide opportunity to the people to use credit cards as well as to improve their credit rating (that's YOU). Bad credit credit cards also act as a training ground for the people to build new spending habits (that's you too!).
Bad credit cards are also called secured credit cards. They're called secured because credit card issuers require consumers to open up an account and maintain some cash balance in the account. This requirement is made to protect the issuers from non-payments of defaulted credit card holders.
The credit card issuer will pay interest on the balance in a consumer's account. And the credit limit on the bad credit credit card is determined by the 50-100% of cash balance in the account. So, card holders actually draw their own money and it's not a surprise that these cards are also referred to as debit cards.
If you're looking for a suitable bad credit card, you'll find plenty of credit card offers in the market. To find a suitable credit card you can analyze some offers using the following selection criteria:
the minimum balance in the bank account,
the application fees and/or other charges,
the credit limit or the allowable spending limit of your bank account balance, and
the rate of interest of the balance in your bank account.
A good credit card offer would require a very small amount of minimum bank balance and would have no fee or charges associated with it. It would also offer a good interest rate and have a credit limit within 90-100% of the bank balance.
Bad credit credit cards are usually easier to obtain because banks or credit card issuers are secured by the capital that you will be charging against. Even though the application process of a bad credit card is simple, it is usually costlier than an unsecured credit card.
So, before applying for the card, find out the total fees and whether it would be refunded or not if the bad credit card application is denied.
Now, once you have decided which secured credit card is best for you, here's what you do.
You scrimp and save until you have at least $250. You then open a new bank account. Preferably at a bank that you have not dealt with before now. You then put your $250 into this bank and then forget that it's in there! That's right. Just forget about this $250. It's gone. You no longer have access to it. Don't even think of it. After you've forgotten about it for about a month, you go in and tell the customer service representative that you want to apply for a "secured credit card."
You then fill out the application, turn it in and leave the money alone and go home and back to your normal routine.
Your secured credit card will arrive in the mail in about 4 to 6 weeks. All this while, you've been working diligently at your job and paying what you can on your bills, right? I hope so. Keep in mind that the money that you'll be using with this credit card is YOUR money. You don't really have any credit rewards at all and you are only allowed to spend about ½ of the $250 that's in the secured account. So, once a week, you go out and buy yourself (NO ONE ELSE) lunch for no more than $15 and charge it onto your new secured credit card. You've gotta eat lunch, right and why not treat yourself to lunch at least once a week (and ONLY once a week)? At the end of the month, that should add up to about $60 to $75, depending on the card's billing cycle.
Here's what you do and you do it every month, without fail and you do it as soon as you get the bill. Don't wait for the bank to take the money out of your secured account. You send them the $60 - $75 and leave the balance in your secured account alone. On the days that you are not treating yourself to lunch…you pack a lunch and eat at work. That's right! Don't even think about buying lunch even if you have to eat yesterday's leftovers, you pack your lunch every single day except that one day of the week. Consider that day a reward for saving money the rest of the week.
What you're doing here is repairing your credit with a simple credit card. Don't EVER use the money in that account. Always pay it off every month and do it on time. This will help establish your new credit during the 5 - 7 years that your credit information reflects the poor credit.
If, for some reason, you somehow do not have the cash, during the week, to buy your lunch…forget it. Don't do it. Wait until the next time that you DO have the cash. Don't try to force anything. Only use cash money that you have available. Don't use your secured credit card for anything else yet. We'll build it up and use it for other things later, but for now…just lunch and only once a week if you have the cash to put back and pay it off at the end of the pay cycle. This is how you appropriately use a bad credit credit card. You are on the road to recovery but you've just started and you are forming new spending habits and spending patterns.
Keep in mind that if you have bad credit you don't have a lot of choices. You cannot get unsecured credit cards that are offered only to the borrowers with a good credit history. In this situation a bad credit credit card offers some help. The plastic money can let you enjoy the benefits of credit cards and at the same time help improve your credit rating.