Instant Credit Catalogs

Instant credit catalogs may be a good way for people with bad or no credit to repair or build their credit history.

Credit programs are available if you have bad credit.

Many instant credit catalog companies are willing to accept low income or bad credit histories and offer credit to high risk individuals. Most simply require that a person is not currently in bankruptcy, has a source of income, and is a United States citizen currently residing in the country.

Credit catalogs offer unsecured credit which can provide the cash flow needed to make a critical purchase and start building a positive credit history. Unsecured credit is a credit line that doesn't need to be secured with collateral. These cards give a consumer a chance to create a positive payment history.

These catalogs work by allowing the consumer to purchase items from a select catalog. One of the best known credit catalogs is Fingerhut which sells a wide variety of products including electronics, baby products, jewelry and toys.

They are similar to a retail store's credit card in that they don't require a prepay. In some cases they may require a deposit on high-priced items and then extend credit on the rest of the purchase. They require the cardholder to pay a minimum monthly fee on a monthly payment plan. These companies usually charge high interest rates if the balance isn't paid in full each month. However, unlike many major credit cards, there is usually no annual fee.

Lenders use a FICO score to assess a consumer's credit risk. The term FICO comes from the Fair Isaac Company, which created the process of condensing a consumer's credit information into a three-digit number. FICO scores calculate total outstanding credit also known as a credit utilization score. To improve a FICO score, a consumer can pay down debt or increase total revolving credit.

Another way to potentially improve a FICO score is to open a catalog credit card. Since these cards can only be used to purchase merchandise from the lender's catalog, consumers are less likely to run up unnecessary debt.

If someone opens a catalog account to build or repair credit, they can carry a small, but current, balance to demonstrate their ability to responsibly handle an outstanding credit balance. Simply having the open credit line can help build credit. If the consumer is not at risk for overspending, they should consider making small purchases and pay off the balance to show their good use of credit.

In order to get the credit repair benefits from a catalog credit card, the catalog company reports the account to the major credit bureaus. Not all credit card issuers report to all three bureaus. By reporting to all three bureaus, a consumer's credit history will start to reflect the good use of credit and start building a good FICO score.

These instant credit catalogs can help a consumer build or repair credit, but they require vigilance to avoid trouble. Critics say these catalogs often charge high interest on over-priced items and a cardholder might not be able to build or rebuild their credit history. There are indeed risks associated including:

• Tying up credit limit
• Racking up interest charges by only paying minimums
• Luring consumer into unnecessary purchases

There are some benefits to these credit catalogs including:

• Easy qualification process
• Low credit limits, which prohibit overspending
• Reward programs for frequent purchases

Instant credit catalogs can be a helpful tool in building or repairing credit but they should be given careful consideration. Opt for companies that don't require a purchase to open the card and then try not to use the card. Remember, in order to repair credit, payment history must be perfect or these cards can do more damage to bad credit.

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