A prepaid credit card can be a solution for those with bad credit. Knowing how prepaid cards build credit is important for your credit repair efforts improve your credit score, Today!
The prepaid card alternative, if you didn't pass the tests for unsecured credit, don't give up hope. Even if you have some negative marks on your credit report that you can't remove a prepaid card may be right for you, because it is still possible to get credit.
It is also possible to get a loan with a low income level if there isn't a negative credit history. However, the loan must usually be secured with collateral.
There may be other forms of collateral acceptable to a bank: a pledge of stocks or bonds, a lien on an automobile or boat, or you may have other equally valuable collateral to use.
Remember, lenders want to lend money because they make money on the money they lend. But also remember that they make money only if the loan is repaid.
Therefore, bank policy is strict and loan officers shy away from approving questionable loans. If your income is low or your credit history is either insufficient for evaluation or decidedly poor, you will not be approved for an unsecured credit card.
You may still qualify for a prepaid credit card. You may be a borderline case that doesn't qualify for unsecured credit but will qualify if some form of security or collateral is left with the lender to ensure payment. This is usually in the form of a savings account at the bank issuing the card.
If you are unable to get a prepaid card on the strength of your collateral, try obtaining a card by having someone co-sign for you. The co-signer should have strong enough credit to act as security for the credit line on the card and some extra, just in case you turn out to be a poor risk.
Becoming a co-signer is a big responsibility. Don't ask a person to co-sign for you if you can't live up to the obligations he or she will then be responsible for.
If you have some capital but a poor credit rating, you may consider a debit card as another type of prepaid credit card. Debit cards look like ordinary Visa or Master Cards. When you use them, you do not receive credit, but your account gets charged.
A debit card provides you the convenience of a credit card while allowing your funds to earn high interest in a money market account, for example. Many people use debit accounts like checking accounts.
The big differences are, it is often easier to use a debit card than to write a check, and some places will accept debit cards but not checks. Many banks now offer ATM cards that double as debit cards.
Your positive credit history using a prepaid credit card or a debit card may not be reported to the credit bureau. Your possession and responsible use of these cards does, however, create references that you can use in the future.
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Disclosure: I am an independent Credit Repair Cloud™ Affiliate, not an employee. I receive referral payments from Credit Repair Cloud. The opinions expressed here are my own and are not official statements of Credit Repair Cloud.