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You can get a credit card even after seeking debt relief

On Behalf of | Jul 18, 2014 | Debt Relief

If you are facing a significant amount of debt, you may wonder whether you will ever qualify for a credit card in the future. Many experts say that those who have sought debt relief in the past actually may be surprised at the variety of cards they may actually be eligible to use. Although your debt load is important when describing your financial challenges, it is not the end-all when it comes to deciding your credit future.

First, it is important to understand the specific information that is contained within your credit score. Not only is your borrowing history included, but other essential information also plays a role in determining your Fair Isaac Corporation rating. This is also known as your FICO rating. On-time payments can help boost your score, as can a low debt-to-credit limit ratio. These scores range from 300 to a high score of 850. Those with credit scores in the 500s are considered to have subprime credit.

Financial institutions will often prefer to lend to those who have low debt-to-credit limit ratios, and they will also prioritize those who tend to pay their debts on time. However, you are not relegated to pre-paid credit cards just because of those factors. If, for example, your income is significant, the amount you earn every month could place you in a more favorable lending category.

It is also worthwhile to explore secure credit cards, which are cards that simply use a cash deposit as collateral. You are still expected to pay the bill, but the card company may be able to claim the deposit if you fail to do so. This is not the same as a pre-paid card, and it can help you build your credit despite overwhelming medical debt or consumer debt. Washington residents who are looking to boost their credit scores after receiving debt relief have a variety of options — your financial future is not as bleak as you might think.

Source: Fox Business, “Bad Debt but Good Income? Your Credit Can Be Fixed” Erica Sandberg, Jul. 11, 2014

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