There used to be a time, that once you've filed for bankruptcy, or defaulted on a credit card, that you were blacklisted from ever owning an unsecured credit card again. Nowadays however, there is a plethora of credit card companies that offer unsecured credit cards to individuals with bad credit, or individuals who have filed for bankruptcy.
Many credit card companies that offer unsecured credit cards to individuals with bad credit, usually start out by initially offering applicants higher annual fees and lower credit card limits. Just about every major credit card company offers an unsecured credit card for individuals with bad credit. If you pay the credit card payments on time for several months or years, then the credit card limits are usually raised periodically. As long as you keep paying the payments on time, the credit card limits are raised.
Some credit card companies buy up unpaid, or defaulted on, credit card debt. This debt is also known as a “non-performing” loan in the banking industry. These credit card companies will then go back to the original credit card holder, who defaulted, and offer them an opportunity to repay the old credit card debt. Usually, these credit card companies will offer the debtor an incentive for repaying the debt. This incentive is in the form of issuing the debtor a new unsecured credit card. This new credit card will have a balance with the limit of the old debt.
The debtor will have an opportunity to repay the old debt, for little or no interest, and will accumulate a new active credit limit for every periodic amount that is paid on the old debt. For example: for every $100.00, that is paid on the old debt, the debtor will receive a $25.00 credit limit increase on the new unsecured credit card. The terms of repayment are usually very strict, however, it is an excellent way to redeem one's credit. In this way, an individual will erase an old debt in which they defaulted on, and establish a new line of credit.
Another way to obtain a credit card when you have bad credit, is to apply for a secured credit card. A secured credit card is a credit card that you actually pay the amount that you wish to charge in advance. The credit card limit is dependent on how much money the card holder actually pays into the account. These cards usually have an annual or monthly maintenance fee. Although this doesn't sound very beneficial at first, the payments, if made on time periodically, actually do establish a history of responsibility, and believe it or not, establish good credit, over long periods of time, if the credit card company reports to the credit bureau.
Applying for unsecured credit cards is an excellent way for individuals with bad credit to purchase items through the normal credit card billing systems found at retail stores and on the internet. These credit cards can also be used at ATM's and at cash advance terminals. The best attribute about unsecured credit cards, is that it is almost impossible to be turned down, because your bad credit history is irrelevant.
The truth is, that if you have bad credit, it doesn't mean that you can't obtain a major credit card.
Here are 5 ways that can increase your chance to obtaining a higher credit card limit
1. Obtain a copy of your credit score report from the credit bureau. Make sure that there is no error in that report. If the report indicated that you have less than favorable creditworthiness, call up the credit bureau and ask them how you can fix the problem. A bad credit report can have many other negative consequences, so you will want to take action to correct the problem as soon as possible. If necessary, consult a credit-repair expert to see how you can resolve the situation in the shortest time possible.
2. If you have a significant increase in your salary, give your credit card company a call and request for an increase in your credit card limit. You can fax or mail your new pay slip to the company to prove that you are eligible for an increase. Do include a cover letter to explain your intention.
3. Use your credit card regularly. As long as there is no difference in price between paying by plastic or cash, you should always choose to use the plastic. This way, you will be deemed as a valuable customer by the credit card company. In addition, you will accumulate more reward points, which you can use to exchange for other useful items later.
4. Do not spend beyond the limit. It is fine if this only happen once in a blue moon. However, if it happen too frequently, this is a clear indication that you have poor control over your personal finance, which means that your credit risk will be high and it will be difficult to get a limit increase.
5. Always pay your outstanding balance on time. This indicates that you are a good borrower, which translate to lower credit risk. Besides paying on time, you should try to pay the full amount instead of the minimum sum. Credit card company charged very high interest rate and you want to avoid paying more that what is necessary.
Keep in mind that your credit card company keeps a record of your transactions and will know your spending and payment pattern. Your performance in the records of your card company will determine whether you will get a higher credit card limit or not. By using your card wisely, you will have an easy time upgrading to a higher credit limit.
Both Bryan Pringle, Ph.d. & Stephen Chua are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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Stephen Chua has sinced written about articles on various topics from Free Credit Report Score, Credit Cards and Mortgage. Stephen Chua is the founder of FindCreditCardsInfo.com, where you'll find detail descriptions of all major credit cards as well as .. Stephen Chua's top article generates over 60500 views. to your Favourites.