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If you’ve got a history of bad credit – or no credit history at all – finding a loan or qualifying for a credit card can seem like an impossible task.Luckily, several credit card providers offer cards that don’t require a credit check.
While these credit cards typically come with higher interest rates and penalties, signing up for one is a good way for anyone who wants a second chance to start rebuilding their finances.
But before putting the pen to the paper, you should make sure that you know what you’re getting into:
- Most of Them Aren’t Credit Cards. Many no-check credit cards, like the popular Visa Premier card and the Mango MasterCard, aren’t actually credit cards at all. They’re prepaid debit cards, which is why the provider can claim there’s no risk involved. Since you have to load the card with your own money, you’re not actually taking a loan from anyone. For people still struggling to get their spending under control, this is often a better option than signing up for one of the few legitimate credit cards that don’t require credit checks.
- They Report to Credit Bureaus. Whether your card is a prepaid debit or a low-limit credit, the chances are good that every one of your transactions will be reported to a major credit bureau. When you’re trying to repair a basement-level credit score, this is an incredibly useful tool to have at your disposal. Additionally, cards like the prepaid MasterCard with CreditBuilder actually give you a small initial loan that you’ll pay off every 12 months, which means that your credit score gets a boost every time you make a payment. This way, you can show lenders and potential employers that you’ve learned from your mistakes and have been making daily improvements to your score.
- Legitimate No-Check Credit Cards Have Enormous APRs. One of the main reasons you’ll want to choose a prepaid credit-improving card or a loan card instead of a credit card is that actual credit cards that don’t run credit checks – like the Capital One BankProgress card and the Aqua MasterCard – carry interest rates around 40%. While it’s understandable that credit card providers want to safeguard themselves against the possibility that you’ll spend yourself into debt, if you do fall behind on your payments, you’ll quickly find yourself in a deeper hole than the one you were in already.
For better or for worse, no-check credit cards are one of the most widely available types of cards on the market. While they have the potential to get you into even worse financial trouble if you misuse them, no-check cards can also be a valuable resource for anyone who’s trying to rebuild their credit.
As long as you use them regularly and make your payments on time, you’ll start seeing your credit score balloon as the cards report your every transaction to the major bureaus.
If you’re thinking about applying for a no-check credit card, you can find a comprehensive list of them in our “Instant Approval Cards” section. There, you can compare different fees and card types and decide which card is best for you.