Those who have made poor credit decisions in the past and who must rebuild their credit in this economy are charged with a grim task. Whatever the reasons your credit score is hurting, now is the time when you want it higher than ever; credit is scarce and hard to come by, so if you want to get anywhere, you need the absolute advantage of a high credit score. Of course, the usual advice associated with rebuilding your credit, such as using a credit card to pay your monthly bills and then immediately paying it off, present a problem. If your credit is bad, and there’s little credit to be had in the first place, how do you get a credit card to use for rebuilding your credit? Are you destined to be trapped in a catch-22, unable to rebuild your credit until the economy improves in another five or ten years?
Thankfully, no. There is something you can do to continue to rebuild your credit (besides the obvious matter of continuing to pay off your debts and pay all your bills on time), even in this economy. Even if your poor credit prevents you from getting a standard credit card and using it to help restore your credit rating, it’s almost certain that you can still qualify for a pre-paid card.
What is a pre-paid card and how does it work? Simply put, it works exactly like a credit card, only instead of the company giving you a line of credit on faith, they require you to put in an initial down payment. So, for example, if you get a pre-paid credit card with a limit of $250, you’d have to pay in $250 before you could use it. If you then “charged” $100 to the card, your limit would stay at $150 until you had replenished what you paid off.
At first glance, this might seem strange. Isn’t the whole point of a credit card to be able to get things on borrowed money? Yes and no. While credit cards do have that benefit, they also have the major benefit of reporting to the credit agencies either good or bad news about your account that can help or hinder your credit score. This goes for both the standard cards AND the pre-paid ones. So, if you’re paying each month on a pre-paid credit card, as pointless as it may seem to be cycling your money through a middle man, rest assured that all the while, the credit card company is reporting your progress to the credit agencies… and your credit score is slowly improving.
If you just simply can’t get any regular credit cards in today’s economy, don’t feel ashamed. Plenty of people whose credit was good enough to get by just a year ago are now finding themselves shut out by the dwindling financial structure of the western world. If you play your cards right, however, you can still hold on and continue to rebuild your credit wisely with the use of a pre-paid credit card.
8 May
