Wednesday, July 25, 2012

Rebuild Your Credit Score With Secured Credit Cards

Your credit score affects so many things in your life. It can determine where you can live and even what jobs you can get since many employers now do credit checks prior to hiring employees. If you have a bad credit score, you can find it negatively affecting your life in so many ways. Rebuilding your credit score can be a slow and tedious process, and when you have a really low score it can seem like all the avenues to raise it are closed to you because you need better credit to use them.

Opening a new line of credit, and properly maintaining it, is one of the quickest ways to boost your credit score. The problem is you already need to have decent credit to get a traditional credit card or line of credit. If you find yourself caught in this catch 22, then you need to learn about secured credit cards. Secured credit cards offer a unique opportunity to people with bad credit to obtain a line of credit to help improve their credit scores.

A secured credit card is a card whose available balance is equal to a deposit you pay to the company issuing the card. If you make a 0 deposit you will be issued a card with a 0 available balance and your deposit will be held in a special bank account. This account will not accumulate interest, but your deposit will be returned in full if you close your account without a balance owed. Many companies that issue secured credit cards will allow you to continue to increase your available line of credit by making additional deposits on your account.

Opening a secured credit card will lower your debt utilization ratio as long as you keep your balance low. The amount of your available credit that is currently being used plays a huge part in your overall credit score, so when you raise your available credit without racking up a higher balance your score will improve. If you are opening a secured credit card in order to help raise your credit scores, it is very important that you keep the charges on it to a minimum.

Just like with any other credit card, you should keep your balance to a minimum and always make at least the minimum payment on your card. A secured credit card will affect your credit score just like an unsecured card would. You account information will be sent to the credit bureaus regularly, so good payment history and a low balance will improve your score while late payments and high balances will hurt it even though your account is secured with a deposit. The bank issuing your card is the only entity, other than yourself, who will know your card is secured.

If you use obtain a secured credit card and use it wisely, you can easily start seeing big gains to your credit score. The longer you keep your account in good standing, the more your score will improve. It will be even better if you also take other steps toward good credit like making on time payments on all your other bills. If you keep your account in good standing for at least a year, many of the companies who issue secured credit cards will allow you to either increase your available credit line without making an additional deposit or even upgrade to an unsecured card.

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