Currently we have an unemployment rate of around 9.1% but this is a national rating and does not necessarily reflect certain state unemployment rates which may be much higher and well into the double digits. As a result of problems resulting from joblessness, many consumers are seeing issues related to various debt obligations that may range from mortgages to personal loans, and as a result of prolonged unemployment and high levels of unemployment that we have seen over the past two years, many consumers are in a position where their credit score has suffered as a result of delinquencies and the general inability to pay on certain debt obligations.
However, we have seen some consumers find themselves in a position where their income has returned as a result of getting a stable job but this has led some in a position where they must focus on rebuilding their low credit score that may have sustained damage as a result of unemployment. In the past we have seen consumers turn to secured lines of credit as a way to rebuild their credit score, and this has usually come in the form of a credit card offered specifically for bad credit borrowers.
Current rates that we are seeing on these cards are around 22% to 24%, but this will obviously differ when it comes to either a lender, a consumer’s financial position, or what card they choose. Some unsecured cards had been offered for bad credit borrowers but secured credit cards are still one of the main areas where consumers focus their efforts when it comes to getting credit and beginning the bad credit repair process. Obviously, this will be a lengthy process for some, particularly those who have seen their credit score drop as a result of foreclosure or defaulting on debts, but the problems many have seen in terms of not being able to meet their payment obligations is something that has become somewhat common among certain consumers.
Recent data that was released here in early October has also shown that continued problems in the area of honoring debt may push the bad credit repair process further down the road for some consumers, as few financial advisers would suggest consumers begin repairing their bad credit while they are still in debt. Delinquencies reportedly rose on various types of loans, that range from home-equity loans to personal loans, but there is some news in the area of lending to borrowers with less than perfect credit that could make getting a credit card for the purposes of bad credit repair easier for some.
There are also indications that banks are targeting subprime borrowers once again as some are not seeing these problems related to delinquency, and feel that even consumers with less than perfect credit may be in a good position to honor credit card debt purchases. While secured credit cards can be more accessible to certain bad credit borrowers, due to the fact that collateral must be provided, financial professionals still urge consumers to remember that paying off debt, controlling their spending, and using sources of debt like these secured credit cards wisely will be the only way to not only help improve their credit rating but potentially avoid problems with debt in the future as well.