Secured Credit Cards

If you are trying to repair your poor credit history, you don’t need to be told how difficult it is to get a credit card. Even if your financial situation has changed, you may need to prove your creditworthiness before your credit score begins to reflect your changed attitude and circumstances. For a person who is unable get any kind of unsecured card, a secured credit card might be a useful tool to rebuild your credit rating.

A secured credit card is not exactly the same as a debit card, but it does involve using your own cash as “security.” With this type of card, your “cash collateral deposit” becomes your credit line for that account. For example, if you put down a deposit of $500, you will have a $500 line of credit. As you begin to establish a history of on-time payments, you may be able to extend your credit line by adding more money to the deposit, or, sometimes, the bank will reward your timely payments by extending your credit line without an additional deposit.

For many people who have a poor credit history, a secured credit card may be a good way to rebuild their credit rating and get their credit score back up. For these borrowers, unsecured cars may have interest rates as high as 24% – not to mention steep annual fees, “program fees,” “participation fees,” and other monthly charges. Staking your own money on a secured card is one way to prove to your creditors that you are serious about rebuilding your credit and establishing a history of on-time payments.

As always, if you want to improve your credit rating, it’s important to remember to pay your bills on time and, if possible, pay over the minimum requested payment. A late payment counts against your score immediately, and it may take up to six months for that to come off your record. Establishing a history of on-time monthly payments is the best way to bring your score up quickly.