Many financial advisers often counsel individuals in a bad credit situation to implement the use of credit cards for the purposes of bad credit repair as there are benefits of using either secured or unsecured credit cards that can aid in the restoration process of a consumer’s credit if they have seen financial setbacks and damage. Obviously, some consumers feel that, because credit cards may have been the reason they are in a bad credit position, using credit to repair a poor credit score is not the best route. However, buying and repaying debt obligations in a timely manner is one of the most widely used and essentially best practices that consumers can implement so that their credit score will begin to rise and their overall financial health improve.
A bad credit score can have a great deal of impact in other areas of a consumer’s life as it will lead to higher interest rates and overall cost on certain debts, but there are some individuals who may even be denied forms of credit, like a home loan, if they are in a poor credit position. Individuals who may have a decent income, or may be on a fairly stable financial ground, could even find that acquiring certain forms of credit or getting affordable interest rates can be difficult as lenders will obviously heavily weigh a consumer’s credit score into their decision to lend.
Yet, some consumers feel that simply making payments on time with cash or their debit card will be helpful, but an article on Bankrate.com states, “…debit card purchases are not reported to the credit bureaus. So this record of on-time payments doesn’t make it to your credit report.” Obviously, paying debts on time will factor into a consumer’s credit score in a beneficial way, as late payments will undoubtably do damage, but using credit cards to make purchases or pay debts and then promptly paying off these credit obligations can also go a long way when it comes to improving a bad credit score.
There are some consumers who may have an unsecured credit card or various credit cards, and as a result, can begin the process of bad credit repair by using credit that is already established in their life. However, in cases where consumers may be carrying a balance or have debt related to these credit cards, getting out of debt is essential for the bad credit repair process as consumers cannot efficiently make purchases and repay on these cards unless they are free of bad credit debt obligations. Also, secured credit cards are an option for bad credit borrowers as they are one of the more common bad credit credit cards used for bad credit repair.
However, secured credit cards will require collateral, typically in the form of a deposit into a bank account, by the borrower and this could be taken if a consumer fails to meet their repayment obligations on charges from a secured card. Yet, when it comes down to bad credit. In general, no matter what credit card a consumer has, their financial position, or the severity of their bad credit debt situation, there is nothing that can overcome poor financial habits and this is one thing that a consumer must focus on when pursuing a higher credit score. A credit score that is good or excellent will reflect a consumer’s smart financial decisions and habits, so consumers who may be in the position to repair their bad credit, have the financial means and access to credit to do so, may also need to consult outside help like a nonprofit credit counselor if they need assistance when it comes to setting future financial goals or simply overcoming poor spending and repayment practices.