Having a secured credit card is a solid selection for those who are trying to rebuild their credit or start from scratch. You don’t need good credit, or even any credit at all to qualify. Which is why secured credit cards are the tool of choice of professional credit repair consultants. These credit cards are very valuable tools in building credit.
I’ve been a credit analyst for nearly 20 years and boy has the industry changed! 20 years ago some people were aware of their credit score. But it was still a time where most people had been taught if you can’t pay cash for it, leave it alone. So building credit wasn’t a priority.
When you rented an apartment they did a credit check, but not as through, or credit score dependent as it is these days. Employers didn’t pull your credit before hiring you. Now these are all common place practices. And most consumers are painfully aware of what their credit score is. They know what a good credit score is and what a bad score is. But while they may be up to date on common credit repair practices. They have no idea how to start re-building your credit.
Listed here are three significant reasons as to why a secured card generally is a perfect option for you:
1. Poor Credit Score – No Problem
Having a poor credit score isn’t a barrier to obtaining one of these cards. They are made specifically for people with bad or no credit. Some of them don’t even check your credit which is why some people call them guaranteed approval credit cards.
2. Better Credit Limits
With a secured credit card, your credit limit will equal the amount of your security deposit. So the more you put down, the higher your credit limit. This is is way better then the unsecured bad credit credit card offers. Most of those cards will only give you a credit limit of $300-$500. And they immediately put fees on those cards of more than 75% of the credit limit in some cases! That you immediately have to pay if you want to have any available credit. This practice will initially DROP your credit score until you pay off the fees. Once you have paid it down your score will go back up and continue to go up w/ responsible usage and on time payments
But the beauty of a secured credit card is that your security deposit will be RETURNED to you after 1- 2 years of good, timely payments. Unlike the unsecured cards where what you paid was a FEE and is gone forever.
Also with a secured card, SOME of the secured credit card companies will allow you to add additional money to your account. So that you can build a large line of credit over time. It can actually act as a savings account! Some secured credit card companies will even pay YOU interest on the money you are using as security!
3. Credit Card to Rebuild Your Credit
Most secured credit cards will report to all 3 credit bureaus. If you are trying to rebuild or build credit this is very important! You don’t want a card that doesn’t report to at least 1 credit bureau. Many people look at these cards as a “second chance” credit card because they are what people use to rebuild their credit after they had some problems in the past. Getting a secured card is the first step to getting your credit score back to where it needs to be. As long as you are responsible with your new credit card, you should be able to take control of your credit score and your overall financial welfare.