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Options are limited for bad credit customers

By Todd Ossenfort

The Credit Guy
'The Credit Guy,' columnist Todd Ossenfort
The Credit Guy, Todd Ossenfort, is a credit expert and answers readers' questions about credit, counseling and debt issues.

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Question for the CreditCards.com expert

Dear Credit Guy,
I decided to apply for a credit card, but I've been declined. The reason is my past-due credit cards that are now paid off. How many years after they are paid off do the credit card accounts remain on your record? I don't want to waste my time with a secured card. Is this all I can get right now?  -- Kimberly

Answer for the CreditCards.com expert

Dear Kimberly,
The credit market in the United States tends to cycle from a loose market (in which credit is extended liberally and at interest rates that are quite affordable) to a tight market (in which credit is extended sparingly and at interest rates that are affordable for those with the best credit). In the fall of 2009, we are in a tight credit market.

Due to this credit cycle, credit card issuers have become much more selective in choosing who will receive a line of credit with a new credit card. For potential customers who have a credit history of late payments, charged-off accounts or collection accounts, it is much more difficult to qualify for a card.

It sounds as if you made mistakes with your previous credit card accounts, and I hope you have learned from those mistakes and are moving forward with firm control of your spending.

To answer your question concerning how long your old paid-off credit card accounts will remain on your credit report, they will rotate off your report seven years from the first date of delinquency. Depending on the age of those accounts, you may have many more years where they will remain on your credit report. The accounts will, however, have less and less impact on your credit score the older they get.

The best way to improve your credit and prove to any potential creditors -- including credit card issuers -- that you are a worthy candidate for credit is to add positive information to your credit report. You can accomplish this by paying all your current credit obligations as agreed and on time. Eventually the positive information will outweigh the negative information, and your credit score will improve along with your chances of securing new credit.

If you do not wish to apply for a secured credit card, you can shop for card issuers that are willing to extend credit to someone with your credit profile. It is likely that you will find a creditor willing to issue you a card, but the interest rate charged on the account may be quite high. You will need to balance your desire for an unsecured card with your willingness and ability to pay a high interest rate.

Before signing on the dotted line, I recommend that you determine how you plan to use the card and assure that the account will meet all of your needs. If you are planning on carrying a balance on the card, can you afford the payments at the interest rate for which you would qualify? My hope is that you need a card for convenience and that you plan to make only those purchases with the card that you can pay off when you receive the statement.

Take care of your credit!

See related: Help for bad credit, 7 bad credit card habits to break now, Patience, persistance are keys to raising your credit score, How your credit score reflects paid-off accounts, National banks tightening credit card lending standards

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Published: September 28, 2009


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Updated: 10-01-2016


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