Re-establishing Credit with Secured Credit Cards

For those with poor credit it can be difficult to be approved for new forms of credit. It can feel like you are trying to get out from under a mountain when you try to re-establish yourself in the credit world. However getting new credit is an important element of rebuilding a credit score that needs work. The past mistakes that you have made with your credit can be difficult to overcome when it seems like no one (i.e. new lenders and creditors) are willing to take a chance on you.

What you need to do in this instance is to obtain a secured credit card if the opportunity to be approved for an unsecured credit card is not available to you. This offers you a means of re-establishing your credit and getting back on track with where you want to be financially.

Secured Credit Card- What is it Exactly?

A secured credit card is used in the same manner as a traditional regular credit card. When you wish to charge a purchase on your card it is swiped and the money is then deducted from the credit limit that you have. You can repay your balance all at once or you can pay it in installments.

What makes a secured card different from an unsecured card is that you as the cardholder must make deposits against the limit that is established on your account. The security deposit on your account is collateral that is held by the credit card company in the event that you default on making your payments.

The credit limit on a secured credit card can be anywhere from 50 percent to 100 percent of the security deposit that you make for your card. To use a concrete example of this, if the deposit you put down for a secured credit card is $500 then the credit limit you will be given will range anywhere from $250 to $500.

There are plenty of secured credit cards on the market for individuals who are doing their part to re-establish their credit and bring up their credit score. You need to be smart when it comes to choosing a secured credit card that is right for you.

It is important to be aware that secured credit cards often come with fees that traditional (unsecured) credit cards do not. Many secured credit cards include application fees, annual fees and processing fees. Be careful when it comes to looking for the right card to improve your credit. Cards that come with high fees can eat into your credit limit very easily and very quickly. They can also tremendously reduce the amount of your deposit. The best secured credit cards are the ones that have low fees and interest rates that are not too high.

Altering Your Credit to Reflect the Good

Bad credit can come about for a variety of reasons. Most of the time it comes about as a result of a payment history that is poor. In other words bills are not always paid on time, the right amount is not always paid or some months certain bills do not get paid at all. You can show a greater level of responsibility when it comes to your bill paying habits by getting a secured credit card and making all of your payments on time. This is not something you are able to demonstrate until you can obtain a new credit card.

Before you decide that you are going to apply for a secured type of credit card find out if the creditor in question will be reporting to all three major credit agencies. This is something you want because if your good payment history is not recorded anywhere then future creditors will not know that you have make some beneficial strides in cleaning up your credit. You want them to clearly see with their own eyes on paper that you are making smart choices.

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