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A credit history is basically an analysis of a person’s reliability for repayment of debts and other payments before due date. There are organizations (credit rating agencies) that function exclusively to do this job of tracking a person's credit history. So, a bad credit history obviously represents the lack of payment of bills and loans on time. These agencies produce a detailed report such as credit limits, payment history, balance amount, and recovery modes. An average credit score, ranges between 300 and 850 and anything less than 500 is rated as bad credit history. For such people, further utilization of any form of credit becomes an issue. Of late, some organizations do offer credit cards for such people too.
Reason for a Bad Credit History
It is not very favorable to have a bad credit history as it leads to a negative rating and shunning away of the lenders. However, in most of the cases, it is the ignorance of the negative effects that makes a person develops a bad credit history. At times you may just stop paying the amount after once or twice and even before you realize, you would have fallen into a mount of debt.
Credit Card Applications for a Bad Credit History Holder
As already discussed, there are companies who offer credit card even if you have a bad credit history, and the cards are of two types. One is a secured credit card for which you will have to deposit an amount as a security to the company, which is supposed to be the 'deposit amount'. This amount can be availed as a credit as and when you require using your card and you will not be able to exceed this limit of amount. On occasions of you not paying the bill sent by the company, your deposit amount will be seized. You will be charged a minimal amount as service charges.
The other type of credit card you may avail as a bad credit history holder is the prepaid card. Here, you pay the money to the company initially and your date is stored in the card.
The application for a bad credit card holder however, helps you improve your credit history.
There are two types of loans offered for bad credits; secured and unsecured bad credit loans. Nevertheless, the interest rates are a much higher than the normal credit holders. You might be able to acquire a better rate if you produce a security backing, like a property or vehicle to favor the loan. It might become tough to find a loan if you do not have anything to pledge as security, and even if you get one, the interest rates could be even higher than the usual bad credit loans.
The other type of bad credit loan is payday loans, which is suitable if your loan amount or the loan period is small. These are normally offered less than 24 hours and you are expected to repay in your subsequent payday. The loan amount range between $100 and $500 and a credit check is no required for this. However, you are expected to produce your employment proof.
By acquiring a secured card, you might be able to help with the repair of the bad credit. Be sure to demand a reduction of credit limit to lower your credit limits so as to spend within limits. Another possible way of bad credit card repair, is to make sure you have closed the accounts that are unused by you, which you might have ignored.
Look for the best rates on the bad credit loan with good terms, and make plans to save for your payments.