The upheaval in the credit market that began the past year is still sending shock waves out into the economy. Lending institutions have adopted much tighter lending requirements and are, consequently, turning away those consumers who appear to pose a higher financial risk. That means that those looking for credit cards for bad credit are having a tougher time qualifying for a new account. Better credit reports and scores are necessary to qualify for many new credit accounts. Even existing customers are finding their credit lines decreased and changes to their interest rates and fees. Data shows that by the end of 2008, nearly half of banks decreased credit limits for current customers. American Express is currently incenting some customers it perceives as risky to pay off their balances and cancel their accounts in exchange for cash. Chase Bank has increased the minimum monthly payment by 3 percent for those who typically carry big unpaid overall balances. Citigroup says it is decreasing credit limits to due to the current state of the economy. Many cardholders have found that their credit scores have taken a hit, as their debt to credit ratio has increased due to those lower credit limits. Others are simply struggling to make payments or defaulting on them, as they prioritize which bills get paid in the current economic pinch. As a result, there are more people who are now looking for credit cards for bad credit to help them through these times.
In order to have a credit report and credit score, you need credit history from things like a credit card. And you cannot get more credit, unless you have some credit history. Those who have to obtain credit cards for bad credit now are all too aware of the importance of credit accounts that are in good standing. They are often forced to obtain a card with higher rates and fees, due to their poor credit histories. These high rate cards allow the consumer an opportunity to improve their credit, assuming the bills are paid on time. More often than not, however, the high charges accumulated on the cards too easily allow the consumer to fall back into debt. A better option is a prepaid card, which offers all the convenience of a card. You put money on the card and can buy things with the card until the balance runs out. A prepaid card will not, however, help you build your credit. Financial experts usually tell consumers to pay off existing debts, keep the oldest account in good standing and resist the temptation to open new credit cards for bad credit. Accounts with a good status that you have had for a long time reflect positively on your credit score. Using a prepaid credit card for convenience and keeping your oldest account current will help you improve your credit. By doing this, over time you will be eligible for cards with more reasonable terms and can stop looking for credit cards for bad credit.
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