Poor Credit Credit Cards

Everyone wants the convenience of using credit cards; even those with poor credit want credit cards. Credit cards eliminate the need to carry large amounts of cash around and they are accepted just about anywhere.

To obtain a credit card, the applicant must pass certain requirements that the card companies put forth when they decide to extend credit. Under most circumstances, persons with good to excellent credit histories have no trouble obtaining credit cards. Other people who have fair to bad credit also can obtain credit or debit cards, but they will pay more in interest and fees.

The credit rating a person has, from bad to excellent, is based upon their credit score. These scores are calculated by a number of factors, including payment history. In general, persons having bad and poor credit scores have acquired a number of records showing late payments, missed payments, and defaults on previous credit extensions. Some people have no credit score because they are young or have never used credit before. Credit scoring points run from 300 to 850 on the FICO (Fair Isaac Corporation) rating scale that is frequently used as reference by the credit reporting agencies.

To be rated as having poor credit, the score is somewhere between 581 and 649. An average score is 723. Credit scores represent the amount of risk to lenders for the chance of the borrower making good on the credit extension. When a person has low credit scores, they can still obtain special credit cards for poor credit. Lenders are willing to give them an opportunity, but at a price. The interest rates will be higher and there will be many associated fees.

For example, interest rates may range from around 12% to about 25%. There may be activation fees, transaction fees, late payment fees and penalties. Many poor credit credit cards are secured cards that require the borrower to make a deposit of a certain amount. The amount is then the credit limit but the credit card company retains the deposit and sends out a bill for payments for any charges that have been made. Secured cards are good for rebuilding credit because the card companies will make monthly reports about payment history to the credit reporting agencies.

Another type of poor credit credit card is actually a debit card. The cardholder deposits cash into their account and they then can use the card to access that cash like a credit card. Many of these do not report to credit agencies; the card is like using cash but with the convenience of a credit card.

Getting a credit card, that valuable piece of plastic welcomed everywhere, is not impossible even with a poor credit history. These cards can be used to build or rebuild a good credit history. Once that happens, the borrower should look at changing up to better rates and fewer fees with credit cards designed for persons with better credit records.