Bad credit is like an infection. It enters, spreads and then weakens the whole system. When it takes hold, the problems snowball. First the interest rates rise on future loans. As the interest rates rise, the monthly payments go up. When the monthly payments go up, the borrower has a hard time meeting them and they become late, racking up late fees and further that person into debt and destroying their credit. When bad credit has established itself everything is at risk. Refinancing a house or buying a car becomes impossible or foolhardy. Many people feel hopeless but, there are many ways to repair credit. One of the best ways is by reestablishing good credit using secured credit cards for bad credit borrowers. Are unsecured cards for people with bad credit a possibility? The answer is no.

An unsecured bad credit card is impossible because lenders are unwilling to risk a line of credit to bad credit borrowers. While unsecured credit cards for bad credit are impossible, secured cards are very possible and quite helpful. A secured card is backed by a deposit a borrower sends to the lender. The lender, in turn, issues a credit card with a limit based on the deposit or a percentage of it. Using a secured card, a borrower can improve their credit just enough to get issued an unsecured credit card for bad credit as long as their credit score falls between 580 and 620.

While the rate of an unsecured card for bad credit can be really high, it’s much less than a secured card. Its usefulness lies in the rebuilding of credit even further. Monthly payments on a line of credit go a long way to increasing your credit score. There are other things to do to increase your score and get an unsecured credit card.

A secured credit card goes a long way to improving your credit score and getting you an unsecured credit card. However, a borrower needs to focus on several other ways as well. So step one is get a secured credit card, step two would be to reduce your debt to income ratio.

The debt to income ratio, or DTI, has a huge affect on interest rates and credit scores. DTI is your monthly recurring debt (don’t count gas, electricity and such) divided by your gross monthly income. Bad credit marks start when this percentage is above 36%. Paying down as much debt as possible, or increasing the income per month, can improve the credit score immensely.

Step three would be to visit a credit counselor. Credit counselors work directly with lenders to reduce the total amount of debt owed, combine payments into one and work out a time line to repay debt in full. Some counselors charge a percentage of the debt and some charge a straight fee. You can, of course, try and work the terms out yourself with your lenders.

Taking these three steps will raise your credit score enough that you will not need unsecured credit cards with bad credit. You can eventually get one with good credit.

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