If you’ve got bad credit, you’re not alone. A report by the Urban Institute released this summer revealed that 77 million Americans have at least one debt that’s currently in collections. That means there are a whole lot of people out there with poor credit.
Credit cards for people with poor credit are helpful if you really need the convenience of a credit card or if you’re actively trying to rebuild your credit. But because most of them require a security deposit before the card issuer will let you have one, bad credit credit cards remain out of reach for some people.
Fortunately, there are alternatives.
1. Prepaid debit cards
Debit cards branded with a Visa or MasterCard logo are readily available. The cards are reloadable, so you can top up your balance whenever you want. They’re not credit cards, so it’s not possible to become overdrawn. If you try to spend more than you have on the card, the transaction will be refused.
But be careful — many prepaid debit card fees are usurious, taking advantage of you because you have limited options. Look for low monthly fees, or cards that waive the fees if you load them with direct deposit from a paycheck or government benefits. Also, prepaid debit cards don’t help you rebuild your credit score, so they’re only a temporary solution to your problem.
2. Peer-to-peer lending
If you really need to borrow money, a peer-to-peer lending site might be a viable option. In this model, individual investors loan money to borrowers like you at rates that are often much lower than those offered by credit card companies. But if you’ve got a rock-bottom credit score, it may be hard to get approved for a loan.
The good news is that peer-to-peer lending companies do report to credit bureaus, so taking out a loan and paying it diligently will help to raise your score.
3. Personal loans
If you have a good relationship with your bank, you may be able to get an unsecured personal loan. Poor credit will make this a harder sell, but your bank may look beyond a credit score if you have managed to stay in good standing with it — keeping your balance above the minimum and avoiding overdrawing your account.
4. Nonprofit organizations
If you’re in a tight financial spot and just need a one-time cash infusion, you might be able to get help from a nonprofit. Organizations like Modest Needs help people out with utility bills, emergency car repairs and medical bills — the unavoidable expenses that can make it hard to keep your job, your home or your health intact. Many cities also offer emergency assistance for utilities, especially in cold weather. You may also be able to turn to a lending circle, which will allow you to get help with your current credit needs and rebuild your credit.
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