Banks No Longer Open Arms to Consumers Seeking Credit Cards for Bad Credit
View PDF | Print View
by: barrywaters
Total views: 53
Word Count: 558
Consumers are still spinning from the economic events of the last year and the impact on the credit industry. Lending standards have become more stringent, as banks and lenders are no longer willing to take a chance on risky borrowers. That means that those looking for credit cards for bad credit are having a tougher time qualifying for a new account. Consumers now need to have higher credit scores and cleaner credit histories to be approved for new credit card accounts. Long standing customers are not immune to the new credit standards either, as many have experienced an increase in rates and fees or had their lines of credit lowered. According to a Federal Reserve study, an estimated 45 percent of banks lowered maximum limits on the credit cards of existing customers in the last quarter of 2008. One of the major credit card companies, AMEX, is offering money to current cardholders perceived as a credit risk to pay the balance on their cards and close their accounts. For its customers who carry large outstanding balances, Chase raised the required minimum payment from 2 to 5 percent. 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. Other consumers are having to choose which financial obligations get paid first in these turbulent financial times, and credit cards bills often take a back seat to mortgage and car payments. 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. If you do not have credit, you cannot obtain additional credit. 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. If consumers keep the hefty rate and fee credit card accounts in good standing, it can help their credit histories. Frequently, though, consumers are overwhelmed by the interest payments and fees and accumulate more debt and make their credit worse. 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. Unfortunately, the prepaid option does not give the consumer an opportunity to create or improve credit history. In lieu of opening new credit cards for bad credit, most financial advisors recommend that consumers pay off debts on their current cards and maintain the longest standing card. Credit scores are improved with the help of long standing credit accounts that are in good standing . Using a prepaid credit card for convenience and keeping your oldest account current will help you improve your credit. Eventually, you will no longer have to seek credit cards for bad credit and can, instead, qualify for traditional cards with low rates and fees.
About the Author
For more info on credit cards, goto lowinterestcreditcards.talk12.net.
Rating: Not yet rated