Those with bad credit, however, are limited when it comes to their credit choices. There are many financial products that are not available to them. When it comes to credit cards, these are the most common alternatives available: Prepaid Debit and Credit Cards, Secured Credit Cards and Unsecured Credit Cards specially tailored for those with bad credit or for sub-prime applicants.

Prepaid Debit And Credit Cards

With this option you can overcome the problem of not being approved for financial products due to your bad credit. It's true that it isn't really financing but it will help you recover your credit all the same because your bills and timely payments will keep getting recorded into your credit report thus improving your credit score and history.

How they work? Fairly simple: You need to deposit an amount into your account and then, you can use the card to purchase anything you want. Sometimes, there are banks and financial institutions offering these prepaid cards with a predefined amount. Thus, you only have to purchase the card and you'll get in return the plastic with the positive balance already assigned.

Secured Credit Cards

Secured credit cards are usually associated with a savings account. In order to use them you need to deposit certain minimum amount on your account and according to the amount of money deposited in your account you'll obtain a credit line in the form of a credit card. Usually, you'll have a credit limit that will only be a percentage of the money deposited and not the whole amount. However, with time, this percentage will increase.

Moreover, the continued payments of your credit card balances will be recorded into your credit report thus increasing your score. The amount of your balances can be automatically debited from your account but that will reduce your credit limit unless you deposit the balance amount before the due date.

Unsecured Credit Cards

There are also unsecured credit cards that can be awarded to those with bad credit. There are certain banks and financial institutions that are willing to offer credit cards to those with credit difficulties. These credit cards don't really charge such high rates as most people think because the rates that credit cards can charge are regulated. However, they do charge high fees for issuing and renovation (annual fee) which can turn holding one of this credit cards a bit costly.

Nevertheless, it is a good start and the credit card payments are reported to all major credit bureaus which will eventually result in an increase of your credit score and an improvement on your credit history if you remember to pay always on time.