Having bad credit is something that follows a person for nearly a decade, and getting rid of it is easier said than done. However, with record job losses and an economy that has tanked, people have fallen on circumstances that are beyond their control. With this bad economy comes foreclosures, defaults on loans and credit cards, and a cash shortage that is crippling.
Credit Problems Can Happen To Anyone
No one wants to have bad credit, it is just something that happens to even the best people. If a credit score falls below the 600 range on the FICO scale, there is not much hope for getting a credit card or even a loan from a predatory lender.
However, those who can boost their scores to reach the 600 range can find financing for mortgages, auto loans and credit cards.
Unfortunately, people tend to view money problems as a character flaw, however, it can happen to anyone at any time. Some will avoid applying for a credit card, for fear that their application will end up in the trash can.
The truth of the matter is, there are many companies out there that will consider someone with less than perfect credit, and some that count on the business from this group.
Finding Resources Locally
One of the first places that people should check is their local bank or credit union. If a person has an account in good standing, and has had for many years, they are more likely to be able to get a line of credit from this institution.
While it is not a guaranteed way to get an extension of credit, it is an avenue that should be explored. It is a great deal harder to get credit these days because credit card companies have stringent guidelines they must follow, but it isn’t impossible.
Getting an approval for a credit card today is much more difficult than it was a few years ago. Most companies have adjusted their criteria to meet the risk associated with lending. While not as many people are being approved for credit cards, there are still approvals.
Things like deteriorating real estate and property values, higher than average unemployment rates and personal debts are all issues that make it more difficult and are taken into consideration by credit card companies. Even customers with high credit scores are not exempt from defaulting, this makes lending trickier than ever and a bigger risk.
Sob Stories Count For Something
There are two kind of people with poor credit, those who fell on bad times and those who just didn’t care. If a person has truly had circumstances beyond their control, but has rectified the situation, then they have a sob story.
Banks love sob stories and people rebuilding their lives, it makes for good lending. A blemish on a credit report, such as a default, may make the application an instant denial.
However, a letter of explanation along with that application may make all the difference in the world. A short statement, around 100 words, about the circumstances that lead to credit problems is most of the time taken into consideration by the approval department.
Honestly, anyone can have a blemish on their report, and being up front and honest about past mistakes can be advantageous for someone wanting a credit line. Even if this doesn’t work there are other options out there.
The Secured Credit Card
While not the most appealing option, a secured credit card offers a person a way to rebuild their credit score. These cards are backed by a cash deposit made by the account holder. The credit card is secured and of little risk to the lending company. These cards can range from a couple hundred too few thousand dollars.
Thankfully, the money goes into an interest bearing account and some companies will give a credit limit that is higher than what is deposited. The money is a down payment of sorts. If the account is not paid, then there is money to pay it.
If a person has received several denials from credit card applications, a secured line may be the way to go. One good credit card account can make the FICO score raise dramatically.
The idea behind this type of credit card is to improve the score and allow the person to get a real account. Some companies offer secured and non-secured accounts. After a significant period of good credit line management, they may be willing to offer other types of credit cards.
High Interest Cards
There are many credit card companies that offer cards to those with bad credit. These cards don’t have such strict approval guidelines and are easier to obtain. The interest rates and the overall terms may be less than desirable.
Some will charge annual rates nearly as much as the credit lines. Still, it is a small price to pay for someone who needs a line of credit and a way to rebuild their less than desirable credit score.
While having bad credit is a hurdle, however, it is not one that is impossible to cross. A little bit of time and research can help a person obtain a credit card account and a way to rebuild past mistakes.