Rebuilding bad credit with new credit is a good way to get back on track provided you’ve cleared all your old debts. You may find it hard qualifying for new credit cards given your past history. But there are still some types of credit cards you can qualify for that will not probe your past. A new credit card will help you add positive information to your credit score. The more positive information you can add, the more your credit score will improve.
Types of Credit Cards For Rebuilding Bad Credit
1. Secured Credit Cards
Secured credit cards are good options for rebuilding bad credit because they typically don’t require a credit check. Secured cards are quite similar to regular credit cards. The difference is that you have to make a security deposit against the credit limit on the card. The deposit is put into a savings account and only used if you default on your credit card. Otherwise, your purchases go against your credit limit.
If you have enough money for a security deposit, then you can get a secured credit card. Your deposit could be as low as $49 on the Capital One Secured MasterCard. The Discover it Secured Credit Card, which is a rewards secured card, is another great option for rebuilding your credit. Look for a secured card that reports to the major credit bureaus, has low annual fees, and converts to an unsecured credit card after a period of timely payments.
2. Retail Credit Cards | Credit Cards For Rebuilding Bad Credit
Retail credit cards is another option, but the high-interest rate and limited use make them less attractive than other credit cards for rebuilding credit. If you’re approved for retail credit cards, you’ll likely have a very low credit limit, around $100 to $300. You may be able to have your credit limit increased periodically as you use your card responsibly and pay it on time each month. Several months of positive payments with a retail card can help you qualify for something better.
Some cards such as Applied Bank Gold Visa take advantage of consumers with bad credit, they charge extremely high annual fees relative to the credit limit – a $125 annual fee for a $500 credit limit in this case. Stay away from such cards as the high cost isn’t worth the small benefit.
3. Prepaid Cards
Finally, prepaid cards are alternatives that can be used to make credit card and debit card type purchases. However, these cards don’t improve your credit score – at least not the mainstream credit score that most lenders use to approve your applications. Prepaid cards do not report to credit bureaus but offers the convenience of electronic forms of payment.