Credit cards are payment cards you can get from banks, credit unions, and other financial institutions. The cards allow one to borrow money from their issuer in times of need. They are different from ordinary loans in that you can borrow in a revolving manner. You have to pay your debts after the end of every month and borrow again. We have credit cards for good credit and others for bad credit. We shall look at a second chance credit card with no security deposit later.
Second chance credit cards are just the ones for building your credit scores. When you land into the bad credit score category due to defaulting loans and lines of credit, late payments, or poor utilization of your credit card, you automatically find yourself in the poor credit category. Your credit scores go down because you cannot qualify for good credit cards.
Most financial companies do not issue credit cards to people with bad scores whatsoever. That is because there are a lot of risks associated with such people. You can imagine having numerous records of defaulting loans and lines of credit. Most financial companies will not risk their money on you. Despite that, we still have institutions that risk giving you cards to help you improve your scores.
What are credit scores?
Credit scores, also called FICO scores, are numerical expressions of a person’s ability to pay a loan. They are expressed in numbers whereby they range from 300-850. 300 represents very poor scores, while 850 stands for excellent credit scores. To find yourself in the topmost section of the grouping, you must have a lot of discipline when paying debts.
Financial companies look at your scores to determine how much to loan you when applying for a credit card or loan. However, you can be approved for a credit card with no credit if you apply for a secured credit card. You might be wondering where to get your credit scores. There are agencies called credit bureaus who have the mandate from the government to get borrowers’ information from credit unions, banks, and other financial companies and avail it when you request a loan or line of credit.
Usually, they use the information sent to them by financial companies to calculate your credit scores. Also, they use the same information to come up with your credit report.
Credit reports and scores are two different things. Your report does not contain the scores but other details such as personal information (such as names, phone number, email address, identification document number, etc.), loans borrowed, how much you have paid and what remains, who gave you a loan or a line of credit, and much more.
How do I get my scores?
Getting your scores is easy, especially if you borrow from financial companies. I have mentioned that credit bureaus calculate scores for borrowers. Therefore, if you need to know your scores, you can get them from the bureaus. You just need to create an account with any bureaus and then request your scores at a certain fee.
We have three main credit bureaus: Experian, Equifax, and TransUnion. The three bureaus also come up with your credit report. Since they get the same information, the reports should show similar information, and if you see any wrong information, you should report it immediately.
You can also get a free credit report from your bank, credit union, or any other creditor that you use. In most cases, it is easy to see them online, although you may request them at a branch. Other places you can get your scores for free include Credit Karma and NerdWallet. If your scores are too low, you can get a secured credit card for rebuilding credit.
How are credit scores calculated?
Many people wonder how credit bureaus calculate scores. Various pieces of information are essential when calculating your scores. They include the following.
i) Payment history
Payment history refers to how you have been paying your loans. If you have been defaulting, you are likely to have poor scoring. However, if you have been paying well on time, you will likely have outstanding scores. The payment history contributes 35% of your overall scoring. Therefore, you must be very keen on making your payments to enjoy better terms when you borrow.
ii) Amounts owed
When talking of the amount owed, we refer to the debt you should pay per given card. That means you can have several cards with low debtors, which is okay. However, if you have borrowed too much with your card to the extent that you have reached the credit limit, financial companies may assume that you will likely default. You should use little of your limit to be on the safe side. Financial experts recommend using at least 30% of your credit limit. The amount owed contributes up to 30% of your overall scores.
iii) Length of credit history
The length of credit history takes 15% of your scores. If you have been using credit cards for a long time and paying nicely, you can be sure that that will bring you a good number of scores. Financial companies can trust someone who has been borrowing and paying for a long time compared to those who just started borrowing the other day.
iv) Credit mix
If you mix various credits such as mortgage loans, personal loans, auto loans, student loans, and so on, FICO will use such details to add 10% to your overall scoring. It is not a must you have all those loans, but you can get a few.
v) New credit
Just like Credit Mix, new credit contributes 10% of your scores. However, if you take too many credits within a short time, that negatively affects your scores. The 10% will come up if you do not get a lot of new credit within a short period.
How to grow your credit scores?
You can grow your scores by taking secured credit cards. These require you to deposit money for security in your checking account and borrow against it. The more your deposit, the higher your limit. But for how long does it take to build credit with a secured credit card? Well, it takes around six months to see a real change in your scores.
Also, you can get credit-builder loans that also operate like secured cards and grow your scores with time. If you have defaulted loans, you must clear them immediately to ensure that credit bureaus record zero debt on your profile. You can dispute any wrong information, such as identity theft and erroneous reporting by financial companies.
Which are the 7 best second chance credit cards with no security deposit?
If you want a second chance credit card, you are definitely looking for a credit card for bad credit. There are various cards that you can get today from various financial companies. Some of the guaranteed approval unsecured credit cards for bad credit include the following.
i) Indigo Platinum Credit Card
The card gives you a limit of around $300 and accepts all types of scores. Therefore, you can quickly get the card and grow your scores if you have bad scores. The Indigo Platinum Credit Card charges an annual fee that ranges from $0 to $99, depending on your creditworthiness. It has a high APR of 24.90%.
ii) Credit One Platinum Visa Card
The Credit One Platinum Visa Card allows you to build your scores without depositing any security. It has a one-time application fee and charges no monthly fees. You can get a $300 initial spending limit and an annual charge of up to $99 with $75 the first year. It gives you regular credit reports.
iii) Secured Sable ONE Credit Card
If you damaged your scores due to various mistakes on your previous borrowings, then you can consider the Secured Sable ONE Credit Card to repair your scores. It has a low-interest rate of 10.24%.
iv) PREMIER Bankcard Mastercard
The card is unique in that it can help you manage your money using a mobile app and a digital wallet. The PREMIER Bankcard Mastercard is suitable for those who want to grow scores from scratch. However, the APR of the card is too high as it goes up to 36%.
v) Surge Mastercard Credit Card
Surge Mastercard Credit Card from Celtic Bank is another option to grow your scores to reasonable numbers. The Surge Mastercard Credit Card charges annual fees, ranging from $75 to $99. It also charges around $10 every month for maintenance. You also part with a $30 one-time application fee and a cash advance fee of 5% or $5, whichever is greater. There is a 3% fee for foreign transactions, and if you pay late, you part with a late payment fee of $40.
vi) Discover It Student Chrome Credit Card
The Discover It Student Chrome Credit Card is another good option to build your scores without paying any deposit. It gives you a 2% cash back at petrol stations and restaurants on up to $1,000 for combined quarterly purchases and 1% on other purchases. It gives you a 0% initial APR on your purchases for six months plus a 10.99% intro APR on balance transfers for six months. Afterward, they charge a continuing Variable APR of 12.99% -21.99%.
vii) Discover It Student Credit Card
The card offers a 0% APR for six months, and then the card’s standard rate APR of 12.99%– 21.99 % Variable APR based on creditworthiness. The Discover It Student Credit Card also gives you a 5% reward.
A credit card allows one to borrow funds from financial companies, whereby most card issuers check on your scores before giving you a credit card. You can get your scores from credit bureaus, including Experian, TransUnion, and Equifax. Free scores are available from Credit Karma and NerdWallet. If you have bad scores, you can get a second chance credit card to build your scores.