Unfortunately, there isn’t a magic wand for credit repair. If you’ve been hit with collection accounts, bankruptcy, foreclosures, or liens- there isn’t a quick fix. The only way to erase these negative marks is to wait for them to expire after seven to ten years. However, that doesn’t mean that you can’t get credit or work towards improving your credit score.
Be aware that you’ll probably be categorized as a subprime consumer, meaning that you’re considered to be a high-risk candidate. Not all lenders work with subprime consumers. Those that do, almost always charge higher interest rates and fees as well as limit the loan amount you qualify for.
Secured credit cards are a great way to repair credit. Unlike a typical credit card, secured credit cards act more like a debit card. For example, you give the lender a cash deposit for $100 and in exchange you get a credit card with a $100 limit. That way, if you default on the monthly payment, the lender can use the deposit you provided to cover the expense. Typically, secured credit card lenders charge high interest rates and hefty administration fees- that’s how they’re able to operate within the subprime consumer market. So, you don’t want to have these cards forever, but they do offer a great way to rebuild your credit history.
*There is an entire industry of scam artists out there preying on people with bad credit. These fraudulent companies offer services promising to clean up your credit reports. They charge outrageous fees that range from $40 to upwards of several hundred dollars per month. And, basically all they’re doing is sending dispute letters to the three major credit bureaus. Don’t fall into their trap- save your time and money and avoid these useless programs all together.
The Breakdown of Prepaid Debit Cards
Prepaid debit cards can provide a great solution for anyone with bad credit wishing to help improve their credit rating, have access to balance their funds online, and make purchases virtually anywhere in the world.
Prepaid debit cards have all the advantages of a traditional check card, without any of the fees and require no credit check to be approved. Prepaid debit cards usually charge a small fee (approximately $10) to activate your account or debit card. Then once the card is activated, customers can load funds onto their debit card as often as they would like for a surcharge fee of (under $5) or for free, at various retail locations. The amount uploaded then acts like a line of credit, allowing you to make transactions anywhere your debit card company (usually Visa or MasterCard) is accepted.
To avoid money uploading fees, prepaid debit cards allow employers to directly deposit funds onto your card without a fee. And as a bonus for linking your direct deposit with your prepaid debit card, your debit card company will usually reward you with a cash sign-on bonus and will never charge “uploading” fees when your funds come directly from your employer. This can save an individual hundreds of dollars in check cashing fees or money uploading fees annually.
Unlike traditional debit cards, which draws funds from a banking account and lets you charge over the amount available and then slaps you with a non sufficient funds (NSF) or overdraft protection fees, prepaid debt cards let you spend your money without worrying about overdraft or NSF fees. This is because prepaid debit cards are designed to automatically cap your spending when your pre-loaded cash has been used up.
Other bonuses to consider, when shopping for a prepaid debit card include; the use of free bill pay online, no minimum monthly balances or transactions required, no monthly fees if you actively use your card, no ATM fees charged by your debit card company, no or low balance inquiry fees (at an ATM or through an 800 number) or free online funds management, no convenience fees, lost or stolen protection coverage, and convenient retail locations where you can upload more cash onto your card, if needed.
The biggest perk to most prepaid debit cards is that while you are loading money and making purchases with your debit card, your debit card company is reporting positive credit history to the three main credit bureaus. Therefore, building or rebuilding your credit without any extra effort on your part.