A lot of individuals have a poor credit rating due to some reason or another. Loan defaults, inability to clear the dues on time, etc. are some of the common reasons behind lower credit ratings. Often, banks deny regular credit cards to folks with damaged credit. In case you happen to be among these individuals, it’s time to repair your credit before the situation becomes worse. It is here credit repair cards come into the picture to help out.
What is a credit repair card?
When your credit rating gets damaged due to whatever reason, you have to take steps to rebuild your credit. It takes a lot of time and warrants money to rebuild your credit standing. You can do away with these issues by applying for a credit repair card. Such a card lets you improve your credit score by using the card.
Types of cards for credit repair
Secured cards
As the name indicates, such a card is secured against default with some form of collateral. These cards are mostly issued to borrowers with damaged credit. With standard reporting to rating agencies, these cards can certainly help responsible borrowers improve their credit rating.
The deposit made to open the card account serves as collateral. It is only used if the cardholder defaults. The deposit is not accessible to the cardholder. However, the cardholder can access or use his deposit by upgrading to a non-secured card after enhancing his score.
Subprime cards
It is a kind of credit card issued to individuals with limited credit histories or substandard credit scores. Such cards usually come with a higher rate of interest. They also feature a low credit limit and include extra fees. These cards are issued by major issuers as well as smaller issuers that only focus on subprime lending. Obtaining a subprime card may require a security deposit to be paid by the applicant.
The deposit acts as collateral against the charges the cardholder will make. The credit limit might match the deposit amount, limiting the cardholder to spend within the range of what he can actually pay for. However, the terms of such a card might allow for credit increases without depositing extra money, if the cardholder pays the bills in a timely manner for several consecutive months.
Prepaid cards
These are credit cards that are secured with a prepayment. They can be compared with prepaid debit cards that are preloaded with funds for transactions. Prepaid credit cards can be used by borrowers with a thin credit profile.
They can also be utilized by folks who have a low credit score. However, effective usage of these cards can help to improve the credit rating of the cardholder. Once his credit score improves, he can switch over to unsecured lines of credit.
Bottom line
Having a desirable credit score is essential to smooth planning and usage of credit. However, there are instances that can affect your credit rating negatively. In such cases, you can rebuild your score using credit repair cards as mentioned above. With the right card by your side, you can easily enhance your financial standing, which in turn will help you qualify for loans and other lines of credit.
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