Credit Cards with Zero Percent Interest Might Interest You

Credit cards can be a wonderful tool to help you manage your money. They can also quickly pull you into a bad place financially. It is all in how you use them. You probably have some concept about a credit card, but you might not understand the details of how they work. This is usually what helps get people into trouble with credit cards. There are some details you should understand before you begin to use a credit card. You may have heard the term zero percent interest, but do you know what that means? Worry not, because I am going to explain the details behind zero percent interest in this article so you understand what it means. This also helps you decide which zero percent interest credit card is best for you.

What Is A Credit Card?

Before we can begin talking about zero percent interest credit cards, I want to make sure you understand what credit cards are. I am sure you know that a credit card is a piece of plastic that you carry around in your wallet. You also know that you can buy things with it. You can also use your credit card online. Each time you use your credit card, you agree to pay back the money you use. You are also agreeing to pay any interest or fees you may have.

The credit card is typically backed by a bank. That means a bank is allowing you to borrow money with your promise to repay it. It is similar to a line of credit. The bank agrees to let you borrow up to a certain amount of money. You can use that amount all at once, but you can choose to only use a portion of it. However, whatever amount you use is due within 30 days. If you do not pay the amount in full, you must pay interest on the money you used but are not repaying right away.

The credit card company always requires you to make a minimum payment. If you do not pay at least that much, you are subject to additional fees. Not paying the minimum amount impacts your credit score. You want to make sure you pay at least this much. Ideally, you would pay off the whole amount each month, but many of us cannot do that.

The way a credit card work is like this:

The credit card company gives you a limit of $5,000. If you have poor credit, your limit is going to be lower, but more on that later. That means you can use the $5,000 any way you want. You use $400 of the available $5,000. That means you now have $4,600 available and in about 30 days, you owe the bank $400. If you pay the full amount, you have no interest charges and your available credit is back up to $5,000.

However, if you only pay $200, that means your available credit is $4,800 and you have interest charges for the $200 you did not pay. Since you have good credit, I will say the interest rate is 10 percent. That means you must pay an additional $20, so your new balance due is $220 and your available credit is $4,780.

Why Is Zero Percent Interest So Appealing?

When looking for a credit card, you should always try to find one with zero percent interest. These types of cards are appealing because you are not charged interest for a set period of time. Typically, the credit card company gives you zero percent interest for 9 months or a year. This means for the next 9 to 12 months, you are not charged interest for any month that you cannot pay your balance in full. The only money you owe during that time is the money you charge. This is a great way to make large purchases, as long as you know that you can pay off the purchase before the time period runs out.

The downside to this type of credit card is if you do not pay off the entire purchase during the promotional time period, you are charged interest on the entire cost of the item, even if you have paid for some of it. Another downside is you could be teaching yourself bad habits by not paying off the full amount every month. You can get used to carrying a balance from month to month. That is fine when you are not being charged interest. Once that interest starts accruing it is an entirely different situation.

The Top Credit Card With Zero Percent Interest

With all this talk about zero percent interest credit cards, I am sure you are interested in finding out some of the best available. I mean, what is the point in knowing you have these options without knowing what they really are, right?

I am going to list some of the best options available to you and give you just a little bit of information about them. Remember, some of these offers are subject to your credit score. Just because they are available does not mean you qualify for them.

Chase Freedom Unlimited

chase freedom unlimited card

This card gives you 15 month with 0 percent interest. Yes, 15 months. This is one of the longest periods of time you will find. In addition to 0 percent interest, this card has no annual fee. It also offers unlimited cash back rewards of 1.5 percent, which do not expire. There is no minimum for redeeming the cash back. If you spend more than $500 in your first 3 months after opening the account, you get a $150 bonus. For these reasons, if you qualify, this could be the best first credit card you can find. You should be aware that after the promotional period ends, the interest rate may be between 16.74 and 25.49 percent.

Discover It Cashback

discover it cashback card

Another card that offers zero percent interest is the Discover It Cashback card. This card offer 0 percent interest for 14 months. After that period, you can expect an interest rate of anywhere between 13.49 percent to 24.49 percent. There is no annual fee for this Discover Card. This card offers you 5 percent cash back at various places that change each quarter. They can be places such as Amazon or various gas stations and grocery stores.

You must activate these offers, but Discover also offers unlimited 1 percent cash back on every other purchase. That is automatic and you do not have to activate this cash back. The best part of this card is that Discover matches all of the cash back you earn for the first year. There is no limit on how much Discover matches. You can redeem any amount at any time and they do not expire.

CapitalOne QuickSilver Cash Rewards

CapitalOne QuickSilver Cash Rewards card

This credit Card is another card that offers zero percent interest for 15 months. After the 15 month period, the interest rate may be anywhere between 15.74 percent to 25.74 percent. This card also offers zero percent interest on balance transfers for 15 months. There is no annual fee with this card. CapitalOne also offers 1.5 percent cash back on all purchases, with no limits. There are no specific categories and you do not need to activate any offers. The cash back does not expire and there is no limit to how much cash back you earn. This credit card also offers a $150 bonus after you spend $500 within the first 3 months after you open the account.

BankAmericard

bank of america card

One last card that you might want to consider is the BankAmericard credit card offers zero percent interest for 18 billing cycles. After the end of 18 billing cycles, the interest rate goes up to anywhere between 14.74 to 24.74 percent. This card does not have an annual fee. This card does not penalize you for paying late. Making late payments does not negatively impact your credit score. This credit card does have mobile banking, but does not have any other promotional offers.

Key Terms I Should Understand

In the section above, I mentioned a few terms that you may not fully understand. These are important terms when it comes to credit cards and proper usage of them. I want to take a few moments to give you some detailed information about them.

I want to start with your credit limit because this is the basis for your credit card use. This is the full amount that the credit card company allows you to use. This amount is typically dependent on your credit score. The lower your credit is, the lower your credit limit will be. This amount can change over time, if you use your credit card wisely. If you make regular payments on time and pay off the full amount, or most of the among, the credit card company will increase your credit limit.

The available balance is the amount of credit available for you to use. The bank gives you a set credit limit and as you use that amount, your available balance goes down. When you pay the credit card, your available balance goes up. I will give you an example in simple numbers. Your credit limit is $1,000. You spend $200 of it. That means your available balance is now $800. When your credit card bill comes, you owe $200 because that is what you used. You pay the entire amount of $200 and now your available balance goes back up to $1,000.

All credit card have some type of fees. You should be aware of them before you begin to use your credit card. Your credit card may have an annual fee. This is an amount they charge you simply to use their credit card. Some of those fees are fairly high and are not worth it, but you must understand what the fee is and why. There are plenty of credit cards that do not charge an annual fee. You should look for those first. Credit cards charge other fees such as a late fee when you do not pay the minimum balance on time. Credit cards also charge a fee if you go over your available balance. Many credit cards will deny the sale if you do not have enough money available, but others will no. You will get hit with a fee if you go over the limit.

Interest is where it gets a little more difficult. Most credit cards have an interest rate. It varies across credit cards and your credit score. In the examples I described above, I talk about simple interest, which is the interest you owe on the money you used this month. However, there is something called compound interest. This is paying interest on what you already owe. This is the way the credit cards get out of control.

I am going to use numbers to highlight what I mean, but keep in mind these are made up numbers to help the explanation. You owe $150, but can only pay $50. Interest is charged on $100. 10 percent interest is added, which means you now owe $110. For the next month, interest is determined on the $110, which is the $100 you used plus the interest on it, so now, you owe $11 more, bringing your total amount due up to $121. These numbers are only if you do not use your credit card during that month. This continues to happen each month until you pay your balance in full.

Some credit cards offer incentives such as zero percent interest for a set period of time. That means during that period of time, no interest is charged for money that you carry over from month to month. This is appealing because you do not have to pay off the balance in full to avoid interest charges.

What Is The Difference Between Secured And Unsecured Credit Cards?

You may have heard the terms secured and unsecured credit cards. Typically, secured credit cards are for those with bad or little credit.

A secured credit card is great for someone who needs to build up credit. It could be because you are young and you do not have any credit yet. Or it could be because you have gotten yourself into a tough spot and your credit score has dropped. No matter the reason, this type of card helps you build up credit. You should know that you will not find a zero percent interest secured credit card. These types of cards work a little differently.

They use your own money to help secure them. You give the bank a deposit of a specific amount. In some cases, your credit limit is the amount of your deposit. It may be $500. You can borrow up to that amount of money. Each month, you make regular payments on your credit card, just as you normally would. Over time, as you continue to make timely payments and make smart decisions with your credit card, your credit score improves. Then the bank increases your credit limit and gives you back your deposit.

An unsecured credit card has none of your own money backing it. You do not have to give the bank a deposit. You just have to have good credit. A typical credit card is considered unsecured.

Does My Credit Matter?

Yes, it is important for you to learn now that your credit always matters. It matters in many different aspects of your life. However, for purposes of this article, I am going to explain how your credit matters for credit cards. The type of credit card and credit limit you receive is based on your credit score. Typically, only those with good to great credit will qualify for a zero percent interest credit card.

If you have very good credit, usually a score of 740 or more, you can qualify for just about any credit card with the best features, incentives, and interest rate. A good credit score of somewhere between 670 to 739, means you can qualify for most credit cards with some fairly good rewards and promotions such as zero percent interest. When you have a credit score in this range, it means that you have a credit history of three or more years and no late payments. Credit card companies also look at how many other debts you have to help determine if you can handle credit card debt.

When your credit falls between 580 to 669, you may start to have some challenges getting approved for a credit card. It is not impossible, but now you are falling into category where you need to do more research about credit cards. It always helps to know your credit score before you begin to look for a credit card. This helps you understand what type of credit cards for which you qualify.

Can I Get A Credit Card With Bad Credit?

Yes, you can get a credit card with bad credit. However, it may be more difficult for you to obtain one. You may have a low available credit. Also, you may need to obtain a secured credit card, depending on how bad your credit score is. You most likely will not qualify for a zero percent interest credit card if you have bad credit.

If you have bad credit, you should be aware of some other points when it comes to credit cards. You should make sure to get a free copy of your credit report. Remember, you are eligible for one free copy per year. You should get one and review it. The first things you want to do is make sure it is correct. If you find errors on your credit report, you should fix them immediately. This helps to improve your credit score. After you do this, take a look at your credit score and understand it. You should also begin to take measures to improve your credit score. You should make sure you make all payments on time and work to reduce your debt.

After you have taken these steps, you should do some research to find the right credit card for you. There is a best credit card to get with bad credit because it is geared towards helping you improve your credit score. You may have to obtain a secured credit card until you are able to improve your credit score. A secure credit card is one that you give the credit card company a deposit to back your card. Typically, your credit balance is the same amount as your deposit.

What Is The Best Way To Use A Credit Card?

I may have mentioned it a few times already, but a credit card is a great money management tool as long as you use it properly. There are a few items to keep in mind when you are using your credit card to help you stay on track. If you can follow a few tips, you can keep yourself from drowning in credit card debt.

  • Pay off your full balance each month. I know this can be challenging, but if you only use what you can afford to repay, you will be able to pay your credit card bill each month.
  • Budget yourself. One of the best ways to stay on track to pay your credit card in full each month is to have a budget. I will go in more detail later in this article.
  • Auto pay. You can set up so that you automatically pay a certain amount to your credit card each month. You should make this amount pays more than the minimum balance.
  • Look for zero percent interest. The best kind of credit card you can have is one that does not have a balance. That way if you are not able to pay off your balance each month, for a short time you will not have interest charges.

Why Should I Create A Budget?

I mentioned earlier that a good way to use credit cards is to pay the balance each month. I also said that the best way to do that is to create a budget so you know how much you can afford to pay each month. It is impossible to stay within your budget, if you do not know how much you can afford to spend. The average credit card debt per person continues to rise each year. The best way to stay on top of it is not to over spend.

Creating a budget is fairly simple as far as writing down all the numbers. It may not be simple for you to stick to, but that is another issue. The fastest way to create a budget is to write down your income in one column. In the next column, write down all of your expenses. Do not leave anything out. This is not the time to hide things. You would only be hiding them from yourself and it would serve no purpose. After you have written everything down, add up both columns. Then you subtract your expenses from your income and hopefully, you have a positive number. That is how much money you can spend each month after you pay all of your expenses.

Should I Save More?

It is always a good idea to save as much money as you can. You never know what is going to happen. There always seems to be some unplanned expense. You want to have money for emergencies, but you also want to have money for your future. The best way to save more money is to cut expenses. Now that you have all of your expenses written down, it is fairly simple for you to see where you spend money. It may be surprising to you to see how much money you spend and where you spend it. Most of us do not even realize where our money goes. Creating a budget helps you answer that question. Once you see where it goes, you can begin to make some changes and cut spending.

Now is the time to take a critical look at your expenses. Put your expenses into categories. Create a category of must have expenses. These are thing such as your mortgage or rent. Your car payment and utilities and food should go here. Keep in mind that just because these are must haves, it does not mean you cannot reduce spending in these areas. Take a look at what is left and see what spending you can cut.

Conclusion

Credit cards can be the best tool you have, or they can be your worst enemy. It all depends on how you use them. When used properly, credit cards provide flexibility with your spending. When used poorly, they can drag you into a vicious cycle of debt. Use them wisely.

How to Find Credit Cards for Borrowers with Bad Credit

Being in debt is one of the worst fears many people have because of the negative consequences it has on their reputation. Besides being listed in financial institutions as an unfortunate debtor, you are unlikely to get access to loans to sort out your financial goals. To make matters worse, you may have made the wrong financial decisions to have led to bad debt. Still, there comes the point where you will need a loan despite having a bad debt record. Getting yourself out of such a mess can be daunting, especially if you don’t have access to professional financial advisors. The good news is, you can still get good credit cards for bad credit from credit card companies.

How to Apply for Credit Cards for People with Bad Credit

Credits cards for bad credit scorers are quite many, but they come with conditions. You need to apply using the following steps:

Being Familiar with Your Credit Score

If you keep receiving rejection alerts after applying for a credit card, it means your score is 580 and below. You will be tempted to make multiple card applications, only to realize the negative effects they have on your score. Avoid this at all costs.

Find a Card That Is Compatible to Your Score

Accepting your current credit score is the first step towards healing. Most lenders already have a credit card comparison chart that shows the type of credit you will need to qualify. You can log into selected sites with your free score to determine where it lands on the graph. You can also compare it to the recommended range. That way, you will avoid risking your credit score further.

Another thing you can do is fill out the form below and you can get offers within seconds. These offers are unique for your situation so we will connect you to companies from which you have a chance of getting a credit card. Start here:


Submit Your Application

After matching your credit score with your credit card of interest, it is time to hit the “apply button”. You will need to prove your full names, home address, phone contact, and email address. Some lenders may also request for proof of income and your social security number.

Provide Your Security Deposit

Lenders that issue secured cards may require you to provide your security deposit. On average, you will need to part with $200 to $300 to secure your card. So, if you deposit let’s say $1,000, you will enjoy a credit limit of $1,000. They will also recommend a preferable repayment method to help you secure your card.

Wait for Your Card

You can only secure a credit card upon approval by your potential lender. Once you get it, you can improve your credit score by using it immediately. Always ensure you repay your debts before the due date to avoid lowering your score.

The Conditions Credit Card Companies Set for Borrowers with Bad Credit

Having a reputation for bad credit does restrict you from accessing or to compare credit cards online. However, you need to understand the pros and cons of obtaining a credit card to sort your financial situations. You will come across plenty of credit card companies that are willing to issue one at a reasonable rate. While this may seem convenient, you need to be familiar with most terms and conditions they are setting. Here are some of them;

Credit Score

A credit score is a rating tool that determines your credit history after exploring many options. Some companies may use the following parameters to assess it.

Credit Rating

A credit card company can easily judge your ability to pay off debts after evaluating your history. In most cases, you will have higher chances of getting one for having a good reputation. If you are a diligent debtor that honors the terms of payment, then you have higher chances of receiving an approval. It means you can pay your dues in full, and on time. Your record is available in the database of your previous lender or credit reporting companies, so retrieving it shouldn’t be hard.

An Excellent or Good Credit Score

Your potential lender can determine whether you have a good or excellent credit score. For instance, if your rating ranges between 670 and 740, then you are a good credit scorer. If it goes above this, then you are an excellent credit scorer. At this point, you are able to pay off your bad credit from your income without breaking a sweat. Your lender will also assess your monthly income to determine how disciplined you are when paying your debt. More so, it may reward you with bonuses for honoring your promises.

Fair Credit Score

If your credit score is between 580 & 669, you are an average credit scorer. Of course, you can still apply for credit cards with hopes of getting good feedback. However, your lender may decline your request depending on their policies. Being in this category means you may have failed to honor your payments in full, in the past 24 months. It gets worse when the bad debt has accumulated to higher amounts, prompting the disapproval from your potential lender.

Bad Credit Score

A score of 580 and below is termed as a bad credit score. If you fall under this category, it means you have failed to honor your credit obligations. At this point, you keep getting alerts to honor your debts from your previous lenders. As a result, the credit bureau will list you as a bad debtor to warn other credit card companies from conducting businesses with you. Your chances of getting an approval from your lender are quite low.

Being listed as a debtor with bad credit has limitations. You may have failed to meet your obligations after being declared bankrupt or after getting reports from debt collectors. It is normal to find yourself in this predicament, which is why you should remove yourself from this category as soon as you can.

The shortcomings that come with a bad credit history are quite many. You will be turned away by many lenders because you are a credit risk. If you are lucky to get a positive response, then you will need to honor special terms. Some of them may offer a secured card which requires you to deposit a specific amount just in case you bail out on them. Still, this doesn’t guarantee an approval even if you place a deposit.

In your quest, you may come across lenders who are quick to offer unsecured credit cards for people with bad credit. The terms and conditions they may set may seem unrealistic. Do due diligence to avoid regretting in future, before applying for one.

Zero Credit Score

Some lenders may receive credit card requests from people who have zero credit score. Potential lenders may honor their requests after examining all the odds.

Things that Can Affect Your Credit Score

Having a bad credit score not only taints your image as a borrower, but it also limits your chances of acquiring the best credit card to get with bad credit. Here are some things that can affect your credit score:

Defaulting on Payments

You may be facing inevitable financial challenges that could lead you to a bad credit score. Your lender will rate you based on your financial history for the past 7-10 years. If it falls anywhere below 580, you will find it hard accessing loans in future.

How You Use Your Credit

When applying for a loan from banks or credit unions, you will need to state your reasons. If you are lucky to land one, ensure you fulfil the purpose of the loan. Because it takes up to 30% of your score, you will need to avoid over-utilizing your credit cards. This will save you the heartache of explain why you failed to keep your promises.

Filing Bankruptcy

Most people who are in deep financial debts are quick to file for bankruptcy to avoid getting a bad record. Well, it is one of the best ways to ensure you retain your assets, but your chances of landing loans will be limited. At that moment, you may fail to see the harsh consequences it will have on your credit score. Remember, credit bureaus will retain your record for use against you in future. You can only declare bankruptcy when your situation goes out of hand.

Deed-In-Lieu

You lender may require you to submit your title deed or car log book as collateral in case you default your payment. Failure to pay your loan can lead to automatic confiscation of your property. If they resell your property to service the loan, you risk losing up to 125 points. This can damage your history as a borrower who looks forward to attaining a good or excellent credit score.

It is possible to rethink your decision of repaying your loan at less than what you had requested from the creditor. This can make you lose up to 125 points as a creditor.

Like any other reporting tool, credit bureaus can make errors. To avoid being listed as a bad debtor, always make regular checks on your credit history. Correcting the errors in good time will prevent you from getting a score you never thought of having.

Being a guarantor to a borrower with a good credit score can boost yours as well. It means you are responsible for the financial decisions they make. If the latter happens, you will have a hard time boosting your scores.

Personal Loans for People with Bad Credit

Being in the list of people with bad credit is not only demotivating, but it also takes a toll on your mental wellbeing. Worse still, you risk getting rejected by many financial borrowers. Now, you are left with one more option; applying for a personal loan. This option sounds good, but it can be a drop in the ocean if you don’t examine the benefits and shortcomings.

The Benefits

Zero Collateral Risk

Most financial borrowers require you to present a fixed asset as security for your loan. It is easy to lose your priced property for failing to pay off debt. Fortunately, you can still get a personal loan after proving that you have a good job. This gives you the chance to retain your assets because you have the ability to pay off your loan.

Duration to Clear Your Debt

Have you have ever found yourself in a situation where you are unable to pay your bills on time? Obtaining a personal loan can be good for you. Unlike other institutions, your personal lender may give you a grace period of one or three years to repay your loan. Always remember to clear your debts within that period to prove your credit worthiness.

Risk-free

Taking a loan from a borrower is easy, until you fail to use it accordingly. If you take a mortgage loan and fail to honor it, you will be face fraud charges. Getting a bad reputation for failing to repay your loan isn’t the only thing you should be worried about. A possible jail term is the last thing you want to face even in your current state. To prevent this from happening, you will need a personal loan for people with bad credit.

Improved Credit Score

Being an excellent credit scorer even if you are obtaining a personal loan can make a good impact on your history. Credit bureaus will assess your history based on many credit accounts under your name. If it proves that you are an excellent credit scorer, then your personal lender won’t have a problem with you. When your credit score is over 750, you will have the chance to obtain more at a good interest.

Helps You Set Up An Emergency Fund

You have so many bills on your hands that you hardly find some money to save for a rainy day. Personal loans allow you to establish an emergency fund to help you meet your future financial obligations.

Fewer Paperwork

Before obtaining a loan, you will need to present relevant documents. These lending institutions want to know you in person before offering the loan. A person lender, on the other hand, may only require your picture ID, proof on income, and your bank account number to process your loan. If you are the type of person that hates paperwork, personal loans could be the best option.

 Little-to-no Hidden Charges

You may have come across lenders with enticing loan requirements, only to realise the hefty hidden charges. Of course, the interest accumulates after a specific period, but it is important that they should let you know before offering their loan. Personal loans for people with bad credit come in handy in such situations. They will only require you to pay the interest rate, then let you off the hook after paying in full.

Zero Penalties

Most lenders don’t like the idea of servicing your loan before the due date. They may penalize you for this. But with personal lenders, you can pay off your debt early.

The Shortcomings

While personal lending may seem like a perfect solution for people with bad credit, it comes with specific shortcomings including:

Debt Consolidation

After being listed as a credit risk, you will be tempted to borrow a personal loan to offset your payment. In the end, you are likely to become a financial wreck because you will be compelled to repeat the same mistakes you made in the past. You are probably gambling with varying interest rates, which is why you need to get yourself out of it. Try deactivating your credit cards once and for all.

Limited Access to Bigger Loans

Your credit reputation is at stake because you have failed to meet the credit card requirements. Your personal lender may not trust you with bigger loans even if your credit scores keep improving.

Higher Origination Fees

Once you submit a loan request, the lender may ask you to pay between 1-10% fees to process your loan. Expect to pay a higher origination fee if you fall in the category of bad credit score. Remember, this only applies to specific credit card companies.

Submitting Full Payments

With personal loans, you will need to pay the full amount before it is due.

Understanding Personal Loan Interest Rates

Did you know that personal loan interest rates keep changing each year? Well, understanding the rates will determine your creditworthiness, the due date, the amount, and the lender’s policies. Currently, the loan interest rate ranges between 10% and 28%. Here are a few facts you will need to consider before applying for a credit card for people with bad credit:

By Lender

Generally, lenders charge different interest rates on unsecured loans after assessing specific facts on your profile. The standard rate falls between 5% and 36%, though leading financial institutions may offer competitive rates. Still, you can access other personal lenders who accept people with bad credit score. Understanding the relationship between the interest rate and the lender’s policies will help you gauge yourself.

By Credit Score

Credit score is one of the biggest determinant of annual percentage rate on unsecured personal loans. If you fall under an excellent credit score category, you will enjoy lower interest rates (usually between 10% and 12). To be on the safe side, you can apply for a 0% transfer credit as opposed to a personal loan to evade charges on interest.

If you are an average credit scorer (less than 580), you will be charged a higher interest rate between 18% and 36%. Worse still, you may fail to qualify for the conventional personal loan because of your bad credit scores. It does not go without saying you can still achieve APRs as high as 100%. You can imagine your recurring bad debt situation that never seems to end. It is advisable to request for a personal loan from a local credit union or a non-profit lending institution to save you the heartache of endless debt.

A Good Interest Rate vs a Bad Interest Rate

Interest rates on personal loans may be good or bad depending on the purpose it will serve, the balance, and the duration. Because you are approaching different lenders, you need to be prepared for varying personal loan rates. On average, a lending institution may a loan range between 10% and 28%. If it is higher than that, it is a bad interest rate. Servicing the loan with interest may seem difficult if you receive higher rates.

One way of avoiding a bad interest rate is by improving your credit score. Approach different lenders and find ways to service your loan to maintain a good record. Remember, they can only lower the rates if you prove that you are credit-worthy.

Extra Pointers that Affect Your Personal Loan Interest Rate

Debt to Income RatioDebt to income ratio infographic

Debt to income ratio is the percentage you incur after calculating the pre-tax your monthly income. For instance, if your pre-tax monthly income is $6,000, and your debt payments are $1,200 per month, your DTI will be 50%. A lower DTI ranging between 45% and 35% is better than 50%. Lenders may view a DTI of 50% badly because you are likely to default your loan repayment.

The Length of the Amount of Loan

Generally, higher loans with lengthy terms attract higher annual percentage rates. Your chances of repaying the loans over a long period of time are limited, especially when you are the type of person with bad credit. Offering a higher amount puts you in a higher risk of defaulting even if your monthly income proves otherwise. Moreover, they attract higher APRs than short-term loans.

Credit History for the Past Two Years

As expected, your lender will consider other factors before tailoring their loan interest rate. Your credit score is the primary tool they will use to determine your ability to repay your loan. You will meet lenders with strict credit restrictions because of your credit score. If you have received are negative credit scores in the recent past, you will have limited chances of getting a good interest rate.

Current Employment Status

Unlike some institutions, personal lenders depend on your monthly income or household income to determine your rate of interest. It calculate your ability to pay based on the tax returns, pay stubs, or other parameters. The minimum annual income for an average borrower ranges from $20,000 to $40,000.

Conclusion

Being listed under people with bad credit isn’t the end of the world. You can still access good credit cards only if you meet specific requirements. Of course, this cannot happen overnight. You will need to evaluate what led you to the credit problems you are currently facing. Once you have identified the cause of your financial mess, you can work on improving your credit score. Be conversant with the credit history records in order to come with the best financial decision. Understanding the financial implications of your action will save you from making similar mistakes in future. Remember, many people have gone through this, and come out stronger than they were. Why not you

What Credit Score Do Credit Card Companies Require?

Deciding to apply for a credit card requires a proper thought process. It is not something that you rush into, and that is why you must take your time to get the right one for you.  There are very many options available in the market, all offering different benefits. Are credit cards based on credit score? If you are applying for a credit card, you may have heard that your credit score will matter. And yes, this is a very important thing you should be aware of. You, however, do not have a very good idea about what this score should be, and do not know how to go about it. But if your curious and want to learn, we will explain everything in more detail for you right now.

Credit Card Basics Spelled Out: Credit 101

Credit Cards Based On Credit Scores – Understanding Credit Score Impact

If the credit card companies give credit cards based on credit score, you should take note of the following.

Excellent Credit Rating

You have a fico score above 800, and the odds of getting an approval are high.  What it means is that your credit history dating back to almost ten years is good. You also have an excellent credit mix meaning you may have different credit cards, and installment loans. It shows that you can handle your debt portfolio well.

The credit cards you will get with an excellent credit score come with a host of bonuses and rewards. You may, for example, get special introductory offers and larger bonuses depending on your spending.  You can apply for cards like the platinum card from American Express, Sapphire reserve from Chase, among others.

Very Good Credit Score

If you have a very good credit score, it means your ratings for between 740- 799.  You enjoy almost all the benefits of those who have an excellent credit card rating.

A Good Credit Score

A good credit score means that your rating is in the range of 670- 739. Your credit history probably dates back three years, and you have no late payments.  You can apply for credit cards from most of the major lenders, and you have a better chance if your income can comfortably take care of the payments.  The lenders will also look at other factors like your monthly expenditure to determine your creditworthiness.  The lenders may also check to see how much debt you have in other credit accounts.

Proper use of the credit card may sway the lender to give you some decent rewards. Making your payments on time will also have a positive impact on your credit rating.

credit score factors

Average or Fair Credit

If your credit score is between 580- 669, you have an average credit rating. You can apply for the credit cards, but you may face some challenges getting approval. Even if you get consent, you will not enjoy the rewards that those with good credit receive.

If you fall within this range, you may have missed a few payments in the past year or two.  You may have also just started the process of rebuilding your credit.  If you have high balances when compared to your credit limit, it will also act as a red flag for any credit card issuer.

While getting a credit card may help you improve your credit score, be careful about the common credit card mistakes people make. Do not give in to the temptation of applying for too many cards; every time you make an application, there will be a hard inquiry. Credit cards based on credit score look at the number of queries; too many may ruin your chances of getting financial approval of up to two years in the future.

You will find credit card companies that have products four people within this credit score range. What you get is an opportunity to rebuild your credit score while enjoying the benefits of having a credit card. The lender may, however, not be comfortable giving you an unsecured credit card.  You can apply for the secured card that will require a deposit.  The deposit will help the company recover some of its money if you’re not able to pay your bills.  You also have the option of applying for retail store cards; the terms are not very favorable, but you stand a higher chance of getting approval.

Some of the companies you can approach include, Capital One, MasterCard, Discover it, among others.

Bad CreditРезултат слика за credit card with bad credit infographic

You fall within the bad credit range if you have a score of 580 and below.  Your chances of getting approval for a credit card with bad credit are very low. You will land within this range if you get many adverse reports on your credit history.  The Credit Bureaus will consider information such as bankruptcies, several late payments, and adverse reports from collection accounts, among others.  The impact of poor credit history are numerous, and you need to get yourself out of that range as soon as possible.

Most lenders will see you as a credit risk because all indicators point to the fact that you may not be able to pay off the debts. There are, however, certain products that credit card companies have for people in this range.  You will qualify for a secured card because the deposit is a buffer for the lender.  There is no 100% guarantee that you will get an approval, even with a deposit.

Good credit cards based on credit score may not be within your reach at this point, but you need to be careful about what you apply for.    Be watchful about some of the unsecured credit cards for people with bad credit.   The terms are usually very unfavorable.   Take time to read customer reviews before signing on.  Doing your research well will save you a lot of heartache in the future.

No Credit

Some people do not have any established credit, for instance, students.  You can qualify for certain credit cards, especially those within the fair credit range.

Getting Approved for a Credit Card

There are many factors credit card companies consider before you get an approval.  It will also depend on the types of credit card you are applying for.   That is why you need to take your time to compare credit cards for good credit. , different credit card companies have different requirements which you will need to fulfill.  Some companies will give credit cards based on credit score, others who look at a whole other range of factors.  Do note that you may face some challenges if your credit rating is below 580.

The good news is there is no actual credit score number that will determine whether or not you get a credit card.  Even those with excellent credit scores may, depending on other factors, not get approval. Credit card companies will take into consideration some of the following.

1. Credit Cards Based On Credit Scores

The lender may depend on your credit score to determine whether or not you are creditworthy. An individual who has a poor credit rating may have difficulty making the credit card payments. An individual can have more than one credit score. You also have the option of checking out some of the best credit card to get with bad credit.  Some lenders will take on the risk of giving someone with a poor payment history a credit card but will take into consideration certain factors.  Such credit cards have a higher interest to protect the lender if you are not able to make the payments.

2. Credit History

Lenders will look at your history with regard to credit to determine whether you make your payments on time or not.  Some lenders will insist on seeing your payment history dating back years.  It will allow them to get a clearer picture of your financial standing.  A credit history check will yield more information than the lender can get from a single credit score.

3.Income Level

Credit card companies will want to know your income level before they can give you an approval for a credit card.  While it will not factor into your credit score, the lenders will want to know that you have a steady source of income.  You should be ready to give additional information, such as tax returns.  Your income level will have a huge role to play on the credit limit the lender will provide you with.  It does not matter how good your payment history is, a low income may result in a low credit limit.

4. Monthly Housing Expenses

The credit card company may express an interest in your monthly housing expenses. They may also ask whether you own or rent the house, and how much you spend on running it. The lender will be trying to determine whether you are living within your income bracket.  If your expenses are higher than your income, it may negatively impact on your credit card application.

 Understanding Credit Scoring and Credit Reports

Резултат слика за credit report infographic

Understanding credit cards is the key when you are applying for a one. So here are some basics you need to know. Credit scoring looks at the number of hard inquiries over the past year. Credit reports will include any inquiries over the past two years.  If the lender finds that you have so many queries, they may not grant you an approval for a credit card.  You may also have a good credit score, but a single late payment will go to your credit report, leading to a denial for a credit card.  Missing one payment will reflect on your credit report for seven years, and credit cards based on credit scores take this very seriously.

 Understanding Credit Scores

Many people assume that you only need one credit score. The reality is that you have the option of getting several scores.  There are many scoring components and models, including FICO score Vantage score, among others.  These are the models that the three major credit bureaus; Equifax, Experian, and Transunion use in determining your credit score. You will, however, find that most of them will rate you a range of 300 to 850.  The higher the rating, the better your credit scores.

Another thing to note is that the different agencies may give you different ratings.  You need to be aware of the model they are using to calculate your credit score, and which credit card report they are using as a data source. You will also find some free resources online, which can give you a free credit score.  Such include websites for credit card issuance and those that offer credit monitoring services.  The three agencies will also give you a report once a year.

What You Need To Know When Applying For a Credit Card

Different credit card companies have their requirements, which they use to determine whether or not to give someone a credit card.  However, most of them will look at your history with debt and how you handle payments. Some of the advantages of having a good credit history include lower interest rate, higher credit limits, and rewards that come with the cards.  Retail store credit cards do not require much to get approval; even those with bad credit can apply.  Good credit cards based on credit score are usually higher-end, have higher limits, and come with some of the best offerings.  They, however, require that you have an excellent credit history to qualify.

There is no way of knowing whether the companies will deny your credit card application unless you apply.  Most companies will revert within 7-10 days.  If you do not qualify, they will tell you why.

If you’re interested in getting a new card, make sure you consider all your possibilities. With the help of our partner Fiona, you can find a list of credit cards you should definitely check out below. If you find something interesting, fill out the form and we’ll get back to you with offers from companies.


Impact of Debt Consolidation on the Credit Score

If you hope to get good credit cards based on credit score, you will need to apply specific strategies. One such approach is debt consolidation. It allows you to lower monthly payments, thus making it possible for you to stick to the repayment schedule. It can be tough to manage the high interest on your credit cards if you have multiple accounts. But if you bring them together, you have a better opportunity of managing them. Let us explore how debt consolidation can affect your credit scores and how you can do it effectively.

  • Balance transfer credit cards will offer you introductory periods, where you do not have to pay any interest on a balance on the cards within a specified period. By making savings, you will be able to pay off your debt quicker.
  • You can apply for personal loans, but make sure you only go for those with low-interest rates.  You get the benefit of getting to pay off the higher interest credit card balances faster.
  • Taking a loan from your retirement account will help you pay off any debts you have consolidated. Be careful about penalties and taxes that apply to retirement accounts so that you do not end up paying more than you expected.
  •  Home equity loans or lines of credit will use your home as collateral.  The interest rates are lower, but you need to know that the lender can auction off your home if you do not meet the repayment terms.

But beware…

Debt consolidation is an excellent way of paying off your debt in a more comfortable manner.  You, however, need to be watchful of the following:-

  • When you apply for new credit applications, the lender will make a hard inquiry.  The more the inquiries, the more significant the impact on your credit scores.
  • Opening a new credit account may temporarily lower your credit score.  The lender will view you as a high-risk borrower because they are not sure about your ability to pay the debt.
  •  The more you make your payments promptly, the better the impact on your credit score.  It, therefore, means that the older credit accounts will have a positive effect, but a new account will lower your count temporarily.
  •  Credit utilization ratio measures how you are using the available credit.  Opening a debt consolidation account will increase your available credit, thus having a positive impact on your credit score.
  •  Make sure you keep up with your payments because this is one of the most significant factors when it comes to determining your credit rating.

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What Can Hurt Your Credit Score

We have looked at some of the things that can hurt your credit score. With a low rating, you will face a challenge, if you are applying for credit cards based on credit score.  You need to be careful about the following;-

    • Missing out on payments;   your payment history accounts for up to 35% of your FICO score. it will also stay on your credit report for up to seven years
    • Credit utilization takes up to 30% of your fico score.  you must, therefore, be watchful that you do not max out your credit cards
    • Hard inquiries when applying for a credit card will impact on your credit score. The inquiries will stay on your credit report for two years, but will only  have an impact on your score for one year
    • Do not apply for too multiple credit cards within a short time.  It may give the impression that you are desperate for credit, and the hard inquiries will show up on your credit report.
    • Declaring bankruptcy can cost you up to 240 points on your FICO score. It also stays on your credit report for up to 10 years.
    • A foreclosure report will be on your credit report for up to seven years and can cost you up to 160 points
    • Deed-in-lieu or turning your property over to the mortgage lender can cost you up to 125 points if the lender sells the property to recover his money.
    • A short sale has the same impact on your credit score as a foreclosure.
    • Negotiating to settle a debt at less than what you had initially agreed with the creditor, can cost you up to 125 points
    • We have talked about debt consolidation above.  The hard inquiry will temporarily lower your credit score, but if you keep up with the payments, you will significantly improve your credit rating.
    • Refinancing a loan can impact due to a hard inquiry,  or a report that it is the same loan, but with slight changes
    • You may need to close a credit card account, but note that you will reduce your credit utilization ratio.  it will also impact on the age of the credit history by shortening it
    • You may be an authorized user on someone else’s credit card account, meaning that you inherit their payment history.  If the initial user had discipline about making payments, it would boost your score. The reverse is that if the person was delinquent, it harms your credit score
    • Having the right credit mix is crucial for a good score.  It accounts for up to 10% of your FICO score
    • You may think that not having a credit card will be good for your credit rating. the truth is, you need to have at least one account to qualify for a FICO score
    • Pay attention to the reports you get from the bureaus, because they could contain errors.  Report any irregularities so that the credit Bureaus can correct them as soon as possible.

Final Thoughts

Applying for credit cards based on credit score can be challenging if you have a poor credit rating.  However, there are measures you can take to improve your credit score. You must keep up with your payments so that you do not damage your credit history.