Unsecured Credit Cards to Rebuild Credit

There are several different grades of credit ratings, such as good, bad, poor and average, that are observed in the entire range of credit ratings. Often people stumble upon bad financial situations due to economic conditions that are not very good, due to which their credit ratings fall down. In such cases, there are several different options that are available for improvement of credit ratings. Often people who provide credit counseling will advise you to stop all your credit card services. If you have a steady income, then you may also consider unsecured credit cards. Some people might dismiss them as an absurd and impractical way of improving credit. However, it is definitely worth a try, as there are strong chances that you might succeed.

Mechanism and Working of Credit Cards

A credit card is a comparatively new concept in the field of lending. There are some very good credit card companies out there, which provide the facility of 'credit cards to improve credit'. However, it is necessary to understand the meaning and mechanism of credit cards, before we get to know more about credit rating improvement (also known as credit repair).

• The mechanism of credit cards is very simple. When a user uses the card to make purchases, the credit card company bears the expenditure of the transaction.
• The company makes an itemized bill at the end of the month and charges a service charge for all the transactions. The extent to which credit card users can make transactions within a specific month is known as the credit limit of that card.
• This process is applicable for all the months and credit card users have to pay the bill every month, before a certain time limit. The credit score drops down, if the user of the card does not respect the deadline of payment. Often credit card companies, also terminate their services if the bill of the card is not paid.

There are two basic types of credit cards: secured and unsecured. The secured ones are tied down by any asset. While availing secured credit cards to rebuild credit, assets are pledged by cardholders with credit card companies, and their liens are transferred to credit card companies. It basically means that if a particular person defaults the credit card payment, then the company has a right to take over the asset and recover losses. An unsecured credit card is, on the other hand, not tied down by an asset and is usually granted to people who can assure a regular payment of bills to the company.

Unsecured Credit Cards to Rebuild Credit

Here is how a credit card to improve credit works. Note that the working is very similar to normal credit cards, save the last feature of reporting to credit rating agencies...

• Usually unsecured cards are hard to come by and people with assured incomes, employed or sound educational backgrounds are given this service. Most of the people who use these cards in order to rebuild credit, are employed and have sound educational backgrounds.
• In some cases, unsecured credit cards are also prepaid. This is usually observed when the applicant of the credit card does not have a reliable source of income.
• In some cases, these credit cards have some specific terms and mechanisms that help the users to improve credit ratings. For example, the deduction at source facility is often used by companies, so that the bill is paid perfectly on time, that is immediately after the user receives his or her monthly salary. In some cases, restrictions on per swipe expenditure are also used. It means that the user cannot exceed a particular limit for one transaction.
• Upon any timely payment of the bill, the credit card company, directly and regularly reports the payment and its details to a credit rating agency. As a result the credit ratings or scores of the credit card users shoot up.

Choosing the Right Card to Rebuild Credit

There are some credit cards which companies have rolled out for people who have bad credit or a less-than-perfect credit. While using these cards you need to bear in mind two crucial facts:

1. Merely getting such a card will not simply improve your credit ratings and scores.
2. Late payment or no payment at all will lead to bad trouble as your ratings will immediately drop down.

When you take such credit cards, make sure that you check the following details:

1. First and foremost check, the credit rating agency to which the credit card company/service reports. Basically the more the better.
2. Just for precaution, check the implications of the late payment of the credit card bill.
3. Then check the monthly APR (Annual Percentage Rate) that is charged by the company. This also an annual fee.
4. Last but not the least plan your expenses which you will fulfill through the credit card. It is advisable to spend a fixed and monthly amount with the help of this card. These can include, groceries, medicines, gas, etc.

The fixed amount will enable you repay the card's bill on time. Apart from that, also make it a point to stop and cancel all other credit cards, in order to banish all shopping impulses and temptations and also all unnecessary expenses. Here are some common examples of such credit cards to improve credit:

• Orchard Bank Classic MasterCard
• Credit One Bank Platinum Visa
• First PREMIER Bank MasterCard Credit Card
• Centennial Classic Credit Card
• First PREMIER Bank Classic Credit Card

The end result is that due to such terms and mechanisms, the bills of such cards are repaid on time, and every repayment results into a rise in credit ratings.