A bad credit score has the ability to harm a person’s financial security and overall value of life. Most people might not realize this but their credit rating reflects their financial reputation. People with a bad credit score are probably not good at managing money or have had a major unexpected shock to their economy. Once a lender finds out about this, chances are they will not be able to receive credit cards or a loan. Keep in mind that a bad credit history does not have to ruin a person for life. The following information will explain how people with a subprime credit rating can still have access to life’s necessities.
The vast majority of the people living the U.S. earns under $100,000 a year. Since this is the case, most people cannot afford to out right buy a home or a car. Instead, they must take out a loan to secure housing and transportation. Securing a loan to get these items is a normal process for most people. Since the economy is set up to function in this way, most people will need a good credit rating to purchase houses and cars. Also, the average person relies on credit cards as an alternate source of savings and funding. This is another reason why having a good credit score is important. In this game of credit that most of us are involved with the name of the game is paying the least amount of interest as possible. With a bad credit score it can be very challenging but not impossible to get credit. It will just most likely be a lot more expensive than if you had better credit. Good credit equals lower interest rates.
According to the Corporation for Enterprise Development, at least 56% of all Americans have poor credit score. Over half the people in this country are not financially able to secure a loan for housing, transportation or credit card. Added to this problem is the fact that many households do not have enough savings put away to deal with any major financial issues. Only 1 in 4 homes that has an income between $50,000 and $90,000 are prepared to deal with any financial disasters or set backs. Many middle and upper-middle class Americans are also struggling financially and have bad credit.
Loans for People with Bad Credit
Over the years, lenders have realized that there are millions of people who have bad credit. Even though lenders will provide credit cards for fair credit consumers; they do not limit themselves to this group of people. Lenders have discovered that people with a bad financial track record are willing to pay out more money to have access to life’s necessities. Once lenders figured out that consumers with bad credit are willing to pay extra money for life’s necessities; they decided to make loans to this group of people. However, these loans are normally made with more stringent demands and qualifications.
Bad Credit Card Loans
Getting a credit card for bad credit is possible. Poor credit individuals can receive a bad credit loan from a lender willing to take a chance on them. Most lenders who provide this type of service to people with bad credit typically want them to meet specific qualifications.
Borrowers who want to receive a bad credit card loan will usually have to be employed for at least 6 months, make a certain amount of income and they might be required to have a banking or checking account with a certain amount in the balance as a form of collateral. Bad credit lenders might also require a co-signer to help secure a loan.
All unsecured personal loans are high risk investments for lenders. Since this is the case, they will usually charge borrowers with higher interest rates and have them make longer payments over time. Charging higher interest and extending payment terms help lenders to reduce the risk of loaning money to people with a poor credit rating history.
Secured and Unsecured Credit Cards
When a person with a poor credit history wants to improve their rating they will most likely have to get a secured credit card. A secured credit card requires a borrower to put down a certain amount of money that they will borrow against. Secure cards reduces the risk to lenders because they are not using their own money on people with a poor financial track record. This is a great way to get your credit score on the road to recovery.
A lender that issues a secured card will make their profits by collecting interest rates and fees from a borrower. In turn, they will give a good credit rating to borrowers who make their payments on time. In the long run, a borrower who has been keeping up with payments will be able to improve their credit history.
Unsecured credit cards do not require a deposit from the lender. Lenders will risk their own money on borrowers with a poor credit score. They will charge high interest rates and extend payments as well. The interest rates and payment terms will probably be a lot steeper for unsecured credit cards because of the added risk that lenders take with loans for people with bad credit.
What can a Bad Credit Card Loan do for People?
Loans with bad credit can help individuals to get rid of financial difficulties by getting their credit history in order. A person with bad credit has limited financial choices in society. Unless they are able to save up enough money to cover the cost, they will not be able to purchase a high value item. This could cause them to live in poor social conditions or create a lot of stress and problems for themselves and for their families. Once again, these problems could be eliminated with the use of a bad credit card loan to start improving their credit rating.
Bad Credit and the Payday Loan Trap
Another reason why a person with a bad credit rating should improve their score has to do with payday loans. A payday loan is a temporary high interest loan made by commercial lenders to people with bad credit. Many people who take out a payday loan are already financially strapped and they end up having a hard time paying off the loan.
People with bad credit might be able to get away with taking out payday loans for a short period of time. However, if they continue this process for an extended period of time they will end up paying a lot of extra money for this service. They will also probably place themselves in more debt. The bottom line is that payday loans should only be used on a limited basis and not as a consistent source of income. A person with a bad credit rating should avoid these types of loans if possible.
Important Tips for Getting a Credit Card with Bad Credit
First, a person should know their credit score before trying to get any credit so they don’t get stuck with bad credit credit cards.
People who apply for bad credit personal loans should also consider using a credit monitoring service to keep track of their expenditures and payments. This type of service will help them to figure out if they are managing their money right.
Every person including those with bad credit should have access to the things they need in life. This is why personal loans for bad credit and bad credit loans are available for people who have to deal with this situation. A person should be given the opportunity to rebuild their credit and to improve their score. Loans for bad credit will not only help a person to improve their finances it could also change the course of their life.