Credit Card Score / How to Improve Bad Credit? – Philip Tirone

Credit Cards for Bad Credit – Helping or Hurting Your Credit Card Score?

Certain credit cards target people with bad credit—we call these “credit cards for bad credit.” And what the banks won’t tell you is that some credit cards for bad credit will hurt your credit score, while others will help your credit card score. Unfortunately, the banks won’t tell you which is which.

But I will!

For the ease of explanation, let’s call the cards that will hurt your credit score “subprime credit cards.”  Subprime credit cards come with such high interest rates and so many user fees that the cardholder’s balance immediately becomes too high to earn a good credit score.

Typical subprime credit cards will offer a low limit—say $500—and an interest rate in the neighborhood of 29.99 percent. These credit cards for bad credit add on fees to open the account, as well as annual fees. On a $500 limit, the fee to open the account could be as high as $125!

Keep in mind that the credit-scoring bureaus award the highest credit scores to people whose balances stay less than 30 percent of the limit. On a card with a $500 limit, the highest balance a person should carry is $150.

If the fee to open the account is $125, a person’s balance is already 25 percent the limit. And what about other fees, like interest rates, annual fees, and the like?

You can see that a person’s balance on a subprime credit card almost instantly exceeds that 30 percent threshold, and without the cardholder making a single charge.

If you are looking for credit cards for bad credit, your best bet is to apply for secured credit cards. Though secured credit cards require a deposit, the best ones do not charge fees that cause the balance to exceed 30 percent.

Fortunately, we have researched all the secured cards out there. These are the best credit cards for bad credit. Remember the basics of building a credit score using credit cards:

1. Keep your credit card limits no more than 30 percent of the balance.
2. Keep three to five credit cards.
3. Do not open retail account.
4. Pay your bills on time.

If you have any questions about credit cards for bad credit, be sure to leave a comment!