How Can Secured Credit Cards Help Your Credit Score?
A secured card by definition is a credit card that is secured by a bank deposit into an account in the cardholders name. Typically, the deposit amount would be the line of credit the bank is willing to offer the consumer, because this deposit is considered collateral.
If the person defaults on payment, the bank minimizes their risk because they have the accountholders funds in the bank account. The bank can opt to recover the funds from the deposit if the cardholder doesn’t use the card responsibly and makes late payments or doesn’t pay at all. Each bank will have different rules. Be sure to read the terms and conditions and to be familiar with all the types of fees that can be associated with the card such as annual fees, monthly fees, transaction fees, interest and intro rates, and more.
So, why would a person want a secured card versus an unsecured credit card?
Secured cards are one of the best options when a person has poor credit, and is trying to build or rebuild their credit history. If a person has been refused an unsecured card, sometimes a secured card is the next best option. Also, if you have a bankruptcy on your credit history, it will be very difficult to obtain a regular credit card. If you choose a good secured card, the bank will report your purchasing activity to all three major credit bureaus. This will can help increase our score over time.
Here are a few tips to follow. Be careful when it comes to the percentage of your available credit limit versus your card balance. Try not to use more than 25% to 30% of your credit limit on a card. Keep the card for up to a year or more, and hopefully, If you use it responsibly, you will start to see an increase in your score.
Other tips to help increase your credit score:
You can obtain a free credit report on https://www.annualcreditreport.com/. If you would like your score, there will be an additional charge. Read over the report and be sure that its accurate. If you see some inaccuracies, try to dispute them and have them removed from the report.
Be sure to use credit responsibly. Make sure you pay all your credit card bills on time. If you are not good at remembering when to pay bills, consider signing up for automatic payment plans to be sure bills are paid on time. But also be sure you leave enough money in your bank account to cover these payments to avoid overdraft fees and other fees.
Try to pay off as much debt as possible. When you pay down your debt balance, it can help lower your score.
Don’t open too many accounts in a short period of time. The banks view this as high risk because you just accumulated a large amount of debt in a short period of time.
Where can you find some of the most popular secured cards?
You can go from bank to bank, and try to find the best deal, or you can view some of the best secured credit cards on our website, CreditCardBroker.com.
Author: Emanuele B. Intorrella