Why Ohio Consumers with Bad Credit Should be Careful with Subprime Credit Cards

Ohio consumers who want to improve bad credit with subprime credit cards should be careful with their payments and spending habits.

There are credit cards available for Ohio consumers with bad credit. Typically referred to as subprime credit cards, these cards have a few things in common. They normally come with annual fees, high interest rates, and low spending limits. While these are not features that Ohioans usually look for in credit cards, subprime credit cards are touted as credit building tools. In theory, if consumers with bad credit use these cards responsibly for a while, they can eventually qualify for credit cards with better terms. In fact, a lot of credit experts recommend this as a credit building strategy. However, a new study from Nerdwallet suggests that consumers with low credit scores seldom benefit from subprime credit cards. Even worse, a lot of Ohioans apparently end up with lower credit scores after using the cards.

How Ohio Consumers Make their Bad Credit Worse with Subprime Credit Cards

Obviously, if an Ohio consumer with bad credit gets a subprime credit card, runs it up, then neglects to pay the bills, their credit score tanks. The account goes to debt collections, and the consumer in question ends up with a terrible credit score AND debt collector calls.

Ohioans who sign up for subprime credit cards usually know that they must make their payments – and make them on time. The real problem with these credit cards is that the consumers who get them are not always aware of how credit utilization ratios affect credit scores.

A credit utilization ratio refers to the percentage of your available credit you are using at any given time. Most credit pros say that you should never use more than 30% of your available credit. On average, Ohio consumers with super prime credit (scores over 780) use about 11% of their allowable credit, but their credit card spending limits are normally in the thousands.

By contrast, Ohioans with subprime credit cards usually have $300-$500 spending limits. So, it’s easy to see why these consumers, on average, use about 94% of their available credit. Sadly, though, many of them don’t know that this is hurting their credit scores.

The Only Way for Ohio Consumers to Build Good Credit with Subprime Credit Cards

Ohio subprime credit card users typically pay around $150 in annual fees. This is expensive unless the cards make it possible for them to improve their credit scores. There is, of course, a lot of value in credit recovery. So, if these consumers are able to earn better credit with subprime credit cards, $150 is a bargain. Although, in order for subprime credit cards to function as credit building tools, Ohioans who use them must strictly follow these three rules.

  • You cannot use more than 30% percent of your spending limit, and you should use less. This means that if you have $300 of available credit, you can charge $90 and absolutely no more.
  • You must pay your balance off completely every month.
  • You cannot miss a due date.

In spite of Nerdwallet’s study, if you don’t deviate from this strategy, you can build good credit with a subprime credit card and other credit recovery efforts. For example, Ohio consumers who want better credit should pay all of their bills on time and routinely check their credit reports. Monitoring your credit reports is the best way to catch errors and mistakes that can unnecessarily bring down your credit score.

The Fair and Accurate Credit Transactions Act (FACTA) entitles consumers to one free copy of their credit report from each of three major credit bureaus every 12 months. Just visit www.annualcreditreport.com to request credit reports from TransUnion, Equifax, and Experian. Then, if you do spot inaccuracies on any of your credit reports, contact the Law Offices of Gary D. Nitzkin, P.C. We offer the best legal credit repair – for FREE – to Ohio residents with credit issues.

The Free and Legal way to Get Better Credit

Don’t let errors on your credit reports bring your credit score down. At the Law Offices of Gary D. Nitzkin, P.C., we’ve been cleaning up credit reports for consumers since 2008 for free. How do we do it? The law allows us to collect our fees and costs from the defendants in any successful action.  This is why our clients pay nothing for the work we do.

Let’s start the conversation about what we can do for your credit. Set up your free consultation today by calling Attorney Gary Nitzkin at (216) 358-0591 or sending him a message through our contact page.