3 types of credit cards that can help rebuild credit scores
Most Canadians know that their credit score is important and it is a number somewhere on a scale from 300 to 900. The higher the number, the easier it is to get credit. For instance, if you want to take out a bank loan, auto loan, a mortgage or line of credit, financial institutions will first review your credit score to determine if you are eligible to borrow the necessary funds. If your credit score is hovering between 300 and 600, you might be out of luck. Banks and financial institutions will be less likely to provide you with any loans. Heck, you might even be refused when applying for a new credit card. And if your credit score is fuzzy?
Remember you are not alone and help is here. Some more good news: there are credit cards available geared towards Canadians with bad credit. A caveat: A deposit is required upon initial startup to secure the credit limit funds and to obtain a credit card.
Here are three types of credit cards that can help you rebuild your credit score.
Secured credit cards
Secured credit cards are similar to a standard credit card but a deposit is required as mentioned earlier upon initial startup to secure the credit limit funds and prior to usage. Usually, a minimum deposit of $200 is mandatory. The credit limit for the card is either a percentage based on the amount of the deposit or can also be the same amount of the deposit.
Banks and financial institutions will follow you progress with secured credit cards and if you are moving in the right direction, they will suggest a credit increase, which is not a bad sign. Please be aware this type of card will have higher set up costs and annual fees.
Prepaid credit cards
One of the biggest advantages prepaid credit cards offer to individuals with bad credit that a standard credit card cannot offer is they do not require a credit check. Prepaid credit cards work like gift cards. You load money into the card like you do in a gift card.
Prepaid credit cards can be used in stores worldwide as well as when making online purchases. Additionally, you wont incur any fees or interest as you only spend the limit amount loaded into the card. There is no way you can overspend. If you try to overspend, you will be declined. Sorry.
Low interest cards
Akin to secured credit cards and prepaid credit cards, individuals with poor credit may also benefit from a low interest card. These credit cards have lower interest rates than the standard 19.99%. If you can pay the balance in full, that’s awesome. But, the truth is an individual with poor credit will likely carry a balance from month to month.
So, a low interest card can help the individual save money on interest as they work towards improving their credit scores. Bonus: some of these cards include rewards and cash back with purchase made with the credit cards.