Using a credit builder card to rebuild your credit after financial difficulties

Using a credit builder card to rebuild your credit after financial difficulties

Konstantin Rabin
Konstantin Rabin

Table of Contents

Living debt-free has become a massive luxury in the modern world, and almost everyone has some sort of debt or financial liability. While some are able to manage these financial liabilities and live their everyday lives, there are many other people who fall behind on their payments and end up in a very bad financial situation. With the increasing cost of living, high levels of unemployment, and low wages, the number of people who suffer from these financial problems are also on the rise.

This problem was pushed even further by COVID-19 which left millions of people unemployed and unable to pay their bills. As the world started to recover from this pandemic, some of the problems brought on by it are still present and have left a great many people suffering from financial difficulties as a result. This is a serious issue because bad finances usually result in bad credit scores, which limit people from borrowing money in their time of need; leading to their financial situation becoming even worse, making it even more difficult to acquire any financial aid.

But, as we know, when a problem appears, people will look for solutions, and in the case of bad credit, there are few options that people can now look to. Among these options are credit builder cards. These are one of the most effective and easy-to-use solutions that help millions of people escape from having bad credit or no credit score at all. But what are these credit builder cards exactly, how do they work, and how can you get one?

What are credit builder cards?

Credit builder cards are credit cards designed to help individuals build up their credit score or put their score back on track after it took a hit from financial difficulties. When applying for a credit builder card, like Zolve Azpire, the card comes pre-approved. This means that you don’t need to wait and hope that the provider will approve your credit card application. In some instances, certain providers might still reject an individual, but this is usually only done when the person in question has a past criminal history related to credit card fraud or other very severe criminal activity.

When using credit builder cards, individuals are either presented with a lower credit limit, or these limits are tailored around individuals in order to make using them more comfortable, beneficial, and less risky. In Zolve Azpire's case, the limit is the amount of money that an individual deposits on their card, making it one of the least risky credit builder cards on the market.

Once an individual acquired a Zolve credit builder card, they can start spending and so raise their credit score. Since these credit cards have very small limits or limits tailored towards individuals, maintaining their credit card and raising their credit score becomes very easy, since it is hard to fall behind on your payments. Some providers, like Zolve, even offer users credit builder cards that don’t have any fees or credit payments associated with them, and these cards are straightforward credit score builders with no risk of making your score worse.

How to use credit builder cards during financial difficulties

When people suffer financial difficulties, it brings a lot of challenges to their lives, and thanks to the way banks and financial institutions decide who deserves a loan or similar financial aid, recovering from such a crisis can be extremely difficult. Since people fall behind in their payments during financial hard times, their credit score takes a big hit and makes it impossible for these people to get any loans. Some banks even go so far as to refuse to give individuals simple credit cards with low limits, leaving these people with very few options to recover from this situation.

Credit builder cards are one of the best solutions to these problems and a lot of people with different financial issues can find them advantageous. For some, credit builder cards can be the key to recovering their credit score, while others might have no credit score at all and can not get a loan when faced with financial troubles. So how can these cards help us?

Credit Limits

When using credit cards, one of the worst problems individuals tend to face is not being able to pay back the money they have spent, and since most credit cards have high credit limits and interest rates, a lot of people spend way too much which damages their credit score. Credit builder cards are designed to remove this problem by providing individuals with credit cards that have very low limits and low-interest rates. Some providers like Zolve even give people the ability to have a limited amount of money they can actually spend. This is the best solution for long-term credit score recovery, as it involves the least amount of risk and the possibility of worsening your credit score is pretty much zilch.

When using a Zolve Azpire credit card, the limits on the card are the amount someone deposits. This essentially works like a debit card, but in reality, it is a credit card that contributes towards your credit score. For individuals who are looking to fix their credit score, this is one of the best solutions, since it involves zero risk and brings great benefits.

No Credit Checks

Another benefit of using credit builder cards is that there are no credit checks. This is probably a given since the whole point of credit builders is to help those who have very bad credit scores or no credit scores at all. Considering how 2022 went, this is one of the biggest benefits of these cards, since a lot of people took a hit on their credit scores. According to findings published by TransUnion, U.S. credit card debt went up by 18.5% in 2022, with the average interest rate on credit card balances now exceeding 23%. Older generations who worked in more traditional fields have suffered from unemployment caused by COVID-19, while younger generations are just starting to become more familiar with investments and trading. Due to their inexperience and misunderstanding of what equity actually is, this latter group of younger people doesn’t know how to trade profitably and we have seen one of the biggest capital losses ever suffered in the last year's financial markets. All of this has contributed to the younger generation losing their credit scores and being unable to recover it for future needs.

Now, through the use of credit builder cards, these people will once again be able to gain access to credit and won’t have to worry about having a bad credit score history or no credit score at all. When looking at studies like the one that was released by the Joseph Rowntree Foundation towards the end of 2021, showing that 4 in 10 working-age low-income households in the UK have already fallen behind on paying bills during the pandemic, it becomes clear that for those who fall on hard times, things can quickly spiral out of control; especially of those bills being skipped are from creditors.

Make regular payments

When using credit builder cards, one thing individuals should do is make regular payments.  When using a credit builder which has a limit equal to the amount of money you deposited, you should start using this card as a debit card. If there is a possibility, you should always transfer some, if not all of your money onto these cards and use them in a way that you would usually use a debit card. This is a good way to approach this undertaking since most of the credit builder cards that have this type of limit system have no deposit fees, no annual fees, and in general, fees are as low as they can go. This gives people the ability to spend the money they actually own and raise their credit score at the same time, without adding any additional expense to their already difficult financial situation.

Take advantage of the rewards offered

Most credit builder cards come with many different rewards and offers which can be beneficial to users. Most of these cards will offer users a wide range of rewards such as cashback, reward points, and other similar benefits. Since people who use these credit builder cards are usually in difficult financial situations, these types of rewards can be very beneficial, as every penny counts, and making even the smallest saving or receiving small rewards can help to be a step in the right direction.

Make your way up

As we mentioned before, credit builder cards are built for raising credit scores in the long run and their effectiveness will not be visible immediately. Because of this, some people who are in need of a loan might not see these cards as useful, since they need money now. For these people, making their way up using credit builder cards is the best solution. When people are in need of a loan, they go to sketchy companies that provide loans without looking at a person's credit score, but these companies usually charge unreasonably high-interest rates that are impossible to pay off. This results in predatory lending companies taking unethical steps in order to get their money back, and most people who use them, usually end up in a worse situation shortly after.

But, when using credit builder cards, these providers monitor your activity and if they see that everything has been going well for you and you are making forward steps with the right decisions, they might also offer you credit cards with a higher credit limit. Since credit limits on these cards are not very high, there is less of a possibility of you making your situation worse, but plenty of opportunity to make it better in the long run while still being able to loan some money and use it to aid your financial situation.

The Azpire product is not supported by The Bank of Missouri.

About the Author

Konstantin Rabin
Konstantin is a seasoned technology and finance writer with over a decade of experience in the financial industry. He holds a Bachelor’s degree in International Business from the University of Groningen and has held top-level positions at major European brokerages and financial data aggregation companies, where he has contributed greatly to their growth and success.