Options if you have bad credit vis-a-vis the card act

Monday, November 1st, 2010
Updated: November 1st, 2010
The content is accurate at the time of publication and is subject to change.

Bad credit means low FICO scores and at least 43.4 million people seem to fall in the bracket where the scores are below 599 which is 25.5% of the population.

This could be an alarming fact but certainly there can be a way out but one has to work on it. One could improve one`s credit scores by erasing the negative information and turn the table in order to go up on the credit rating once again. The fastest and simplest way to do it is by getting hold of another card (new one) and using it in a responsible manner and working on getting the credit rating to a decent spot. One need not necessarily obtain a card and make fresh purchases but keep the card and use it sparingly. Merely being in possession of the card and not using it in itself could generate the positive information on the card.

The two options for an individual with bad credit are secured and unsecured credit cards. Though the nature of the cards remains the same, the fees that are associated with these cards have changed.

The cards that come under the general category are the unsecured cards. These are the best option for someone who is looking forward to restoring the credit rating as well as accessing another card to avail the benefits. Earlier companies would provide a credit line of about $250 on these cards but the customer was charged a fee of $200. However, with the new act in place issuers can charge only 25% of the card limit as fees in the first year.

To counter this card companies charge a processing fee of around $25-$45 for a credit limit of $300. In spite of this the consumer is lesser burdened, the reasons being that the present fee structure is much lesser and the cards have more value as the credit available is not lost due to the fees. Since payments are upfront and the presence of a processing fee indicates that there are fees associated with the card.

Secured credit cards are good options for those who do not wish to avail a loan. There is a security deposit required on these cards and the credit limit is almost equivalent to that amount. Secured cards do not have a fee since there is a down payment requirement and are the cheapest and the best for those who wish to rebuild credit.

All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.

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