If you have been keeping even a loose ear on the financial world lately then you probably agree that many individuals have accumulated much more credit card debt than they would consider tolerable and have thus been dinged (perhaps heavily) on their overall credit score.

We have been working on compiling a list of some options for those people now considered to have poor credit.

The first option we’d like to mention comes as sort of a last resort but shouldn’t be completely overlooked at is may help you keep spending under control. The prepaid credit card works essentially like a debit card in that you can only spend what you have. You will never have to worry about going into debt, however you will also not be able to build credit as no real credit is ever issued to you. Ideally, these cards should only be used if you are attempting to keep spending under control and possibly already have credit cards with high balances.

The second option is also unfavorable in our opinion, and may even put further unwanted dents into your credit score. These are unsecured “sub-prime” credit cards. They will typically come with a low credit limit, especially if/when your credit history is checked. These max limits could be as high as $1000 but are typically closer to $300-$500. There are two aspects of these cards which make them unfavorable to you. The first is that you will incur fees, mostly described by the credit card companies as “processing fees” or “annual fees.” It is not unheard of to have these fees amount to as much as $100 – $200 per card issued and, at the same time, only providing a credit limit of $300-$500. The second unfavorable aspect of this card is that if your maximum limit is sitting at a low number, then it will be easy to hold a high debt to credit limit ratio. For example, if I have an unsecured credit card with a $500 limit, it wont be hard to run up a balance of 50% of my overall limit or $250. This ratio (1:2) puts your credit worthiness in a poor light.

The secured credit card is the probably the best type of credit card for people with bad credit or no credit (if you cant attain one). A secured credit card gives you a credit line based on your deposit with the credit card issuer (hence the term secured). You will be given a credit limit that is generally the amount of your deposit. Unlike unsecured sub-prime cards, secured credit cards do not generally come with processing fees or “sign-up” fees, however they could charge an annual one. Most secured credit cards report to credit bureaus and some report them as unsecured credit as well. The other main advantage this option has over the others is that you can receive a lower (better) “credit utilization score” or “debt to credit limit ratio” which we mentioned above. If you have a limit of $2,500 and maintain a balance of $250, this looks a lot better than having an unsecured credit card with a limit of only $500 and a balance of $250. And if you can find one of these credit cards with a low APR, even better!

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