If You Have Damaged Credit
Sometimes people make unwise choices or take on more credit than they can handle and end up with a bad credit history. Sometimes they acquire bad credit through divorce, loss of a spouse, or bankruptcy. If you have bad credit, or have no credit history, chances are you can still get a credit card, but it will cost you more, and the terms won't be as favorable as they are for those with good credit or a history of making timely payments. You may only be able to get a $500 credit limit, and you'll probably pay an exorbitant interest rate. Use the card wisely and make your payments on time, and eventually you'll qualify for better terms.
Research the best credit card deals, and apply only to one at a time. Applications for credit show up on your credit report and can make potential credit card issuers nervous, because they think you may be taking on more credit than you can handle. If you get turned down for a major credit card, try a department store card or gas card. These are often easier to get and making your payments on time for one of these cards can build a credit history that will help you qualify at some point for a major credit card.
Secured Cards
If all else fails, consider a secured card. You put your own money into a savings account and that amount, or some portion of it, becomes the security for your credit line. If you don't pay your bills, the card issuer will use the money from your savings account to cover your debt. It may be difficult to come up with the amount to deposit, but you can build a credit history using this method. Many people find that after twelve to eighteen months of making timely payments on a secured card, they can “graduate” to a regular credit card.
Since your goal with a secured card is to establish or re-establish good credit, make sure that the company issuing the card reports to a credit bureau. Otherwise, the card can't help you build or repair your credit history.
As with any credit card offer, beware of disreputable issuers. Secured cards are a favorite with unscrupulous marketers and you're a potential target because you can't easily obtain credit. Study the fine print before applying. Secured cards typically carry a higher interest rate and higher fees. Ask whether there are application or processing fees, which can total hundreds of dollars. The latest trend in secured cards is no application fees, so do your homework and save yourself some money.
Cosigned Credit Cards
If all else fails, you may be able to find someone to cosign on a credit card for you. Remember: If you do this and you don't make your payments, you can ruin the credit of the cosigner, who would have to pay off your debt. You wouldn't want to do this to someone who was willing to go out on a limb for you.
Don't fall for advice given by some credit-repair services or credit doctors telling you to obtain an employer identification number (EIN) and apply for credit using that instead of your social security number, so your credit history doesn't pop up when a credit check is performed. It's a felony.
Questionable Credit Card Offers
If you have poor credit, you're more susceptible to questionable credit offers, so stay on your toes. Don't fall for offers of easy credit, ads that require you to call a 900 number (you'll pay a fee for the call and may never see the credit card), or offers to repair your credit. You have the legal right to correct any errors in your credit report by directly contacting the credit-reporting bureaus; don't pay someone to do this for you. Some credit-repair companies make false claims about their ability to clean up your credit. Only the creditor or the credit-reporting bureau can remove a debt from your record, and the only way to clean up your credit history is by making payments on time for several years and paying off your debts.
