Bad Credit? How to Find Credit Cards and Fix your Credit Problem
When you’re a struggling student with tuition fees and dozens of expenses like books and dormitory fees to worry about, it’s no wonder that you can find yourself deep in debt. The problem is that you also have limited income. Since you’re studying, you can’t exactly get a full time job, and without a degree, it can be hard to get a high paying job. (Being a waitress doesn’t exactly pay well.)
Why Students Need Credit Cards
But it’s a catch 22. Students need credit cards just as much—if not more—than anyone else. What if you need cash to tide you over between jobs? What if you have to buy books or pay for groceries, and the allowance from your scholarship (or your parents) come in late.
While it’s possible for students to get jobs, they’re rarely long-term. One month you’re working at the neighborhood coffee shop, the next month you decide to let go of the position because of a heavy course load. While you can always get another job, you still have school expenses to manage while you’re waiting for the next paycheck.
Ideally, credit cards can provide you that kind of financial relief. Even if you’re not liquid, at least you can pay for the things you need. However, many traditional credit card companies won’t grant you one, not with your low credit scores. In fact, many institutions don’t even give out cards to students at all. Even if you’ve never missed a bill in your whole life, since you don’t have a long employment history and regular income, you may be denied flat-out.
Getting a Credit Card with a Poor Credit History
Even though you have a bad credit history, you can still have a credit card. There are many institutions that accept applications with “shaky” credit scores, and at relatively competitive interest rates as well.
These institutions have realized that the strict credit guidelines aren’t always workable. For example, students may not have long employment history, but they can still earn enough to pay for their charges. Or, someone may have had records of missing payments, but they may be more conscious about honoring their debts because they have learned from their experience.
So they do grant credit cards, albeit with low credit limits, and a higher interest rate than what they’d give someone with a perfect credit score. Others ask for a form of security or deposit (also called secured credit cards) which can act as collateral in case you miss payments.
Still others will ask for a co-signatory (like your parents) who can “vouch” that if you miss the payments, they can be asked to pay for the loan.
You may also try approaching department stores or gas stations that offer charge accounts just for their store. While you have limited shopping options, at least you will always have a safety net.
Benefits of Applying for a High Risk Credit Card
It’s always good to have one credit card for emergency purchases, or to free you from the burden of having to carry cash whenever you leave the home. So even if the credit card has high interest, assuming that you only use it when you need it, and make your payments on time, this shouldn’t be a problem.
And the fact of the matter is that to improve a credit score, you need to get credit. Each time you make a purchase and faithfully and conscientiously pay your bills, your credit profile improves. In fact, some specialty credit institutions that specifically target those with poor credit history will even send regular reports to credit bureaus, making it easier for you to rebuild your credit history.
Things to Consider
However, do be prepared for some of the realities of a high-risk credit card. With low credit limits, you really have to pay off your balances regularly or you won’t have enough to make a big emergency purchase. In fact, most financial experts say that you should whittle down your credit balance twice a month – each time you get a paycheck. Missing a payment will only pull down your credit rating even more—which only exacerbates the problem.