Suffering from bad credit leaves many feeling completely hopeless and as if there isn’t anything they can do to pull the bad score up, especially when the bad score is the result of numerous late payments.
However, by changing your financial activity and utilizing the best credit cards for bad credit in the right manner, you can bring your credit score up significantly within a year.
If you’re like many, however, then you probably don’t understand credit cards all that well and subsequently don’t know which ones can help you raise your credit score. The following are the four best types of credit cards that can actually help you build up good credit in a relatively short amount of time.
In essence, a rewards credit card is one that offers rewards the more you use their card. Rewards credit cards can help you raise your credit score and build new, good credit when the debt is paid off on time. However, failing to pay the credit off in a timely manner may actually have the opposite effect and hurt your credit score.
The best part about a rewards credit card is that it offers rewards for using their service, which is always nice. Certain examples of rewards offered by credit card companies may be in the form of cash, such as a check or gift certificate, free airline miles or possibly hotel stays.
Rewards credit cards are best for individuals who have a larger income but are still in debt. Essentially, the more you spend the more rewards you will receive, which also results in a better credit score. In the event you are in a position to charge a lot to your credit card and still pay it off in a timely manner, a rewards credit card is best as you will receive great rewards for doing so.
While the cash rewards are always nice, many who travel frequently for work consider the free airline miles and hotel stays to be a much better bonus than the money in hand. Be sure to seek out the best rewards card for you personally as they all differ.
2. Low Interest
A low interest credit card is exactly what it sounds like; the credit card provider offers low interest rates on the particular card in question. While low interest credit cards work well for many looking to raise their credit score through the utilization of a credit card, they are typically the hardest to receive. Subsequently, you may need to have an already good score in order to receive a low interest credit card and are simply looking to raise your score from good to great.
Quite obviously, the most appealing part about a low interest credit card is the low interest, meaning you pay back far less than with other credit cards.
Low interest credit cards are best for individuals who are either looking to take their credit from an already good score to a great score or an individual who is looking to build credit that they don’t yet have. In other words, a person with no credit is considered to not be good or bad by loan services. Subsequently, they may or may not be granted a loan when needed. Therefore, even though there technically isn’t any bad credit, it’s important for individuals with no credit to build credit, and a low interest credit card is a great way to do so in a responsible manner.
With that said, be sure to pay any and all credit back in an extremely timely manner as low interest credit cards tend to be more strict.
3. Balance Transfer
Balance transfer credit cards allow users the ability to transfer their current credit card debt from one credit card to another, typically with the hope that doing so results in lower interest rates. The only major drawback to a balanced transfer credit cards is their is typically a transfer payment, which is usually around 4-6%.
The best part about a balance transfer credit card, however, is that it allows you the ability to transfer your credit card debt to a different place that offers better interest rates. While the process may take some time to complete, doing so is a great way to save on how much you owe. Depending on the credit card that you switch to, you are typically given between six months to two years to pay off the current credit card debt.
Balance transfer credit cards are perfect for individuals who currently have credit card debt as the main reason for their poor credit score. By using a balance transfer credit card, you can save money and build credit at the same time.
As mentioned with previous cards, paying a balance transfer credit card on time is crucial to ensuring the strategy is successful in raising your credit score.
Lastly, a secured credit card is the most recommended credit card for anyone who suffers from really poor credit that doesn’t allow them to receive other forms of credit cards, such a balance transfer or low interest credit card.
Essentially, a secured credit card is one where a deposit is made upon activation, typically around several hundred dollars. For the most part, you can use a secured credit card in the same manner as you would any other credit card. The difference, however, comes when you fail to pay on time, which hopefully never happens. In the event you don’t pay back on time, the credit card company can take the money out of the secured deposit as payment.
While paying a secured credit card is a safe way to raise your credit score, failing to pay it on time, as with every card, results in worsening credit.
Secured credit cards are perfect for anyone not able to receive other credit card types, and you can move into an unsecured credit card as the credit card begins to gain more confidence in your ability to pay all credit charges on time.
Do you have any advice or helpful tips for building credit with credit cards? Leave a comment and share your experience in the section below.