Have no credit, bad credit or no checking account? There are countless victims of the recent recession and poor money management skills. In today’s economic climate lenders have tightened the reins on issuing new credit. But credit is still a necessity in today’s society. How can first timers establish credit without a credit history? Or how can persons with bad credit, repair it if no one will give them a second chance?
Did you know that your credit history is used to determine insurance rates (car and home owners), interest rates on loans (cars, mortgages, etc); it is used to determine if you will be a reliable tenant when renting an apartment, or if you will need a co-signer. Utility and service companies use it to determine if they will require a deposit before providing services. If you are a business owner, you need credit to expand your business. The lower your credit rating, the higher the interest rate you are charged and the lower the amount lenders are willing to risk (your credit limit). Thus you can see the importance of establishing a good credit history or repairing your history if you’ve had difficulties in the past.
For consumers who find themselves in this situation there are two viable solutions. The first is a Prepaid Visa or MasterCard. Prepaid cards offer all the conveniences of a credit card without the debt. No credit checks or checking accounts are required. Cards offer free features such as direct deposit, bill pay and email/text alerts for easy management and more. Cards can be used wherever Visa and MasterCard are accepted – including online and ATMs for immediate and easy access to cash. Prepaid card issuers generally guarantee 100% approval. There are no credit checks or checking account requirements. You can only spend what you have on the card so overdraft fees are eliminated and no worries about checking account balance minimums. Card activity is reported to the major Credit Reporting Agencies, establishing a favorable credit history and the opportunity to obtain a regular credit card in the future. Prepaid cards are becoming more and more popular. They are not only good options for those wishing to establish credit for the first time or those seeking to repair a damaged credit history, but they are great choices for students as well. Many parents have even taken this route to help teach their teenagers financial responsibility with the added benefit of being able to track their spending. Some of the providers allow issuance to card holders as young as thirteen.
The second option is a Secured Credit Card. These cards differ from Prepaid Credit Cards in that a security deposit is required. Depending on the issuer, your credit limit will be equivalent or some multiple of the deposit made. If you ever decide to close the account with a $0 balance, the deposit is returned to you. However to establish a good credit history with a secured card, you must be disciplined. You must be diligent in making payments on time and paying at least the minimum required.