The concepts of credit history and credit rating have been introduced to aid credit creation facilities. The concepts are basically used to rate creditability of a person regarding repayment of loans and credit. A bad credit history has many drawbacks, but the situation can be overcome, with the help of certain credit cards.
Credit card is a type of credit creation facility, wherein credit card companies bear the expenditure of user of the card for a period of one month and charge a fee for undertaking the transactional risk. Credit creation also includes the facility of loans that are provided by banking and finance organizations. Both these facilities have given rise to a concept known as credit history and ratings.
What is Credit History
A credit history of a person is actually a rating or analysis, in which the person’s creditability or reliability for timely repayment of debts, on or before the due date, is rated. There are separate finance organizations that track and give reports about credit history of a person by contacting all the banks and financial institutions from which the individual has availed credit creation services in past. A good credit history is achieved by timely repayment of all bills and debts, and is extremely good for availing any other finance service like a loan or credit card.
On the other hand, a bad credit history is derived due to delayed or default payment of debts and bills. An individual with a bad credit history, always finds it difficult to avail any kind of credit creation facility. However, some finance and credit organizations, and credit card companies have come with facilities like credit cards even for people with a bad credit history.
Credit Card Application for People with Bad Credit History
There are many types of credit cards that are offered to people with a good credit history. However, lenders who are principally banking and finance organizations, prefer to offer the people two types of credit cards, namely the prepaid credit card and the secured credit card. The application and usage of both the cards is not at all difficult.
To apply for any of the two cards, the applicant must fill in the physical application for or the form that is available on the website of the credit provider or the bank. After the application process is completed, the credit history of the applicant is considered. In some cases the reason for a bad credit history is also to be communicated to the service provider. Then the company or organization, providing the service gets in touch with the organizations who have previously provided service to the applicant.
The service provider also gets in touch with the applicants employer, for details of periodic remuneration. Then a suitable plan or service that defines the limit of credit that can be availed, is proposed to the applicant. The final stage is, signing of the agreement. This step is very important because the signing of the legally enforceable document creates a contract, to which the applicant and service provider are parties.
Credit card companies prefer to give applicants with bad credit history, two types of cards. The first one is the secured credit card. To avail this service, applicant has to deposit a certain amount of money with the company. The sum of money is actually a collateral and is termed as ‘deposit account’. The amount of money that can be spent with this card cannot exceed the amount deposited in deposit account. Hence, more the people deposits, more becomes his spending power.
The company is empowered to confiscate the deposit account to recover losses in case of default of the periodic bill, that is sent by the company to the user. Due to this fact it is advisable that one does not have a very huge range for the card as a default can result into a financial disaster. A nominal service fee is charged with every bill by the credit card company.
The second type of card that is offered by the credit card company to people with bad credit history is the prepaid credit cards. As the name suggests, the money is first paid to the company and the data is stored in the card. The prepaid credit card is very effective in keeping unnecessary expenditure at bay. This credit card application has proved to be highly effective and in maximum cases has helped the applicants improve their credit history.