Bad Economic Times Need Not Mean the Loss of Your Credit Rating Forever
Posted 07/20/09
Millions of people unexpectedly found themselves without jobs during the economic collapse of 2008 and 2009, due to circumstances totally beyond their control. As a result, they were unable to make monthly payments on their mortgages, loans, and credit cards. Many filed for bankruptcy protection. People who had the power to purchase almost anything they wanted just a few months before were powerless to do anything but sit back and watch their good credit rating slip away.Historically, one of the repercussions of bankruptcy has been that the debtor would be unable to obtain credit for at least seven years after filing for protection, rendering major purchases such as applicances and cars impossible. For those who want to get back on their feet and reestablish their good credit rating, there now are secured, or bad credit credit cards to help them on their way. However, bad credit credit cards are not intended to fuel an irresponsible lifestyle.
Bad credit credit cards require an upfront deposit and allow a very low credit limit to start. The debtor can use the card for small purchases, pay the balance off monthly, and gradually reestablish his credit rating over a period of time. The lender may elect to periodically increase the credit limit as a good payment history is built and eventually switch the debtor to an unsecured card.
This may sound like a dream come true, but there are cons to bad credit credit cards along with the pros. Some cards charge exorbitant fees in the first billing statement that can eat up the entire credit limit. They may also charge extremely high interest rates that not only drain the credit limit but trigger overlimit fees and charge interest from the moment of purchase rather than granting a grace period.
Bad credit credit cards can be invaluable to rebuilding your credit rating, providing you do your homework ahead of time. Be sure that your chosen card company reports to all major consumer credit bureaus. If not, all your careful actions will see no result. Also remember that bad credit credit cards are only a tool to help you get back on your feet and not a permanent solution. You are on your way to a fresh start if you can find a card company that reports to the major credit bureaus, charges reasonable initiation fees and interest rates and offers a grace period for interest on your purchases.
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