Whether you have got no credit or damaged credit, secured credit cards are a good tool for edifice a good credit history.
Several calendar months ago Tom, a member of CreditBoards.com, filed for a Chapter 7 Bankruptcy. Now he is in the procedure of rebuilding his credit history. Its A undertaking that is not easy, but with patient continuity he is seeing advancement already. Daily he checks his credit score and is slowly seeing improvement.
1 - In improver to correcting every mistake, even the smallest ones, on his credit report, he is using a secured credit card.
2 - This secured card is an of import tool in the overall procedure of edifice or rebuilding credit.
Who should see a secured credit card?
Someone who have no credit history.
Someone with a damaged credit history.
What is a secured credit card?
Secured cards are credit cards opened with a sedimentation into a nest egg account, money market or certification of deposit. The amount of sedimentation required changes from card to card, but generally minimum amounts range from $250 - $500. These finances are considered your security and will even earn a small interest since they are being held in a nest egg account. Your credit bounds is determined by the amount you sedimentation into the nest egg account. Sometimes the bounds will be for the full amount of the deposit; other modern times it will be a percentage of the total.
It is of import to maintain in head that a secured card is a credit card, not a debit entry card. If full payments are not made each month, then interest is charged on the outstanding balance. And the lending establishment utilizes the security money to pay off the debt only as a last resort. Even though the card is secured, it is still possible to damage credit.
What are the benefits of a secured credit card?
Establishing credit. If you have got never had a credit card, a good first measure in establishing good credit is applying for a secured credit card. Assistant Professor of Economics at Capital Of Texas Peay State University in Clarksville, TN, Kraut Plummer says, A secured card is most utile for the individual starting out on their credit history, since it states that the individual is willing to take the extra measure to set up credit.
Reestablishing credit. If your credit history is damaged, you may only be able to measure up for a secured credit card. Using this secured card appropriately and within the set parametric quantities will assist reconstruct your credit and measure up you for an unsecured card. If you have got had to register for bankruptcy, however, you may not measure up until it have been discharged.
Preset bounds cannot be exceeded. If poor disbursement wonts were portion of the cause for bad credit, then a secured credit card will assist maintain disbursement in check.
Useful for transactions that necessitate a credit card. Hotels and car rentals necessitate the usage of a credit card. If you dont measure up for an unsecured card but you do for a secured card, then you are still able to make the transaction.
What should I look for or avoid when shopping for a secured credit card?
Fees. This is the country you will really desire to research when shopping for a secured credit card. Some cards will come up with fees that tally into the 100s of dollars, eating away much of the credit you secured with the nest egg account. Professor Plummer states a card with no fee is the best, but a small one-time fee can be okay. Annual fees for attractive secured cards typically range from $20-$35. Be certain to watch out for concealed fees such as as registration charges and setup fees.
Interest Rate. Just because you have got got no or poor credit doesnt mean value you have to settle down for the highest interest rate. Interest rates for attractive secured cards should not transcend 19%. Shop around and get the most competitory rate available.
Read the mulct print. Linda Tucker, Director of Education for Consumer Credit Counseling Service for Land Of Opportunity and Memphis, TN, emphasizes the importance of reading the mulct print. Doing so will allow you cognize your exact duties to the issuing company: for example, the saving grace period, what haps if you dont do a full payment, and what fees are attached if you dont do the full payment. Understanding these inside information will assist do certain you are not additional detrimental your credit.
Fraudulent Offers. As with unsecured cards you need to watch out for fraudulent offers.The Federal Soldier Trade Committee gives the following advice to protect yourself from credit card fraud:
Offers of easy credit. No 1 can vouch to get you credit. Before deciding whether to give you a credit card, legitimate credit suppliers analyze your credit report.
A phone call to a '900' number for a credit card. You pay for phone calls with a '900' prefix -- and you may never have a credit card.
Credit cards offered by "credit repair" companies or "credit clinics." These businesses also may offer to make clean up your credit history for a fee. However, you can rectify genuine errors or obsolete information yourself by contacting credit bureaus directly. Remember that lone clip and good credit wonts will reconstruct your credit worthiness.
When will I measure up for an unsecured credit card?
It can take respective calendar months to see an improvement in your credit history. Bankrate states its A good index when you begin receiving circulars in the mail for unsecured cards that your credit is improving. However, its A good thought to go on taking things slowly. Using a secured card will assist you learn healthy wonts so that when you make get an unsecured credit card you stay in control of your disbursement and credit.
Where can I happen a secured credit card?
Most companies dont publicize secured cards. But you can see the Card Reports subdivision of http://www.CardRatings.com to happen out where and how to apply. Chink on the nexus entitled Cards for Consumers with Poor or No Credit.
Tom urges sticking with lone 1 or two cards and keeping disbursement to a minimum. The end is to pay the card off each month.
Tucker stresses the importance of paying the amount owed each month; otherwise late fees can be charged, interest rates raised, privileges lost, and credit history negatively affected.
Make certain you are getting a credit card as opposing to a gas card or a section shop card.
Make certain a reputable bank or credit union, even a local one, is issuing the card. And, dont automatically presume a bank is issuing the card.
Not all issuers report to the three major credit agencies (Experian, Equifax, and TransUnion). Its of import to get a card that makes report to all three agencies; otherwise you will be cachexia your time. Fortunately, secured cards normally report to the credit agencies just like unsecured cards (you should verify this before applying).
If you have got got got filed for bankruptcy, you may need to wait until it have been discharged before qualifying for a secured card.
Get one lone if you cannot get credit, since you have no credit record; or if you have poor credit. Plummer says, Many companies will not even number them as credit, such as as automobile F&I (Finance and Insurance) people, although they will not acknowledge it. So, if you dont really need a secured card, you will be doing more than injury than good.
Finally, whatever state of affairs you are in, no credit or poor credit, the best manner to construct good credit is to put up a budget and then lodge with it.
1 You can pay rank fees to any 1 of the three credit bureaus Experian, TransUnion, and Equifax- to be able to check your credit score online daily. Visit our Credit Information subdivision for more than details. Uncle Tom urges purchasing Microsoft Money 2004, which come ups with a one-year membership to Experian (value of $99.00).
2 To happen out more than about correcting mistakes on your credit report, read our article How to Correct Amalgamated or Split Credit Reports.