A Secured Credit Card Could Lead To A Higher Credit Rating
An unsecured credit card gives you a simple and convenient way to build your credit history, since no form of collateral is required to obtain one; but if you have poor or bad credit, it will be almost impossible to obtain approval on an unsecured credit card.
A person in a bad credit situation will more likely be able to obtain a secured credit card. These types of cards require the use of a savings account, monitored by the card company, in which a cash deposit is placed to act as a form of collateral on the credit card account.
Payment histories on unsecured credit cards are most often watched by the three major credit bureaus, but secured credit cards are not always monitored by these credit bureaus or even report their payment histories, it depends upon the individual companies that issue the credit cards.
Secured credit cards offer an uncomplicated way to increase your credit score; this should be done by choosing those companies that report the payment history to major credit bureaus. They may or may not be listed on the application form, but the benefits of using a secured credit card in this way may be further explained by the company’s customer service department.
Raising your credit score is easy for you to do if you use the secured credit card to buy whatever you may be needing at the time and being sure you are making payments on time.
The secured credit card is different from a standard credit card, because if payments go into default, they are collected from the balance you have sitting in your savings account.
The approval process for a secured credit card is usually quite easy, these types of credit cards more hassle free than any other credit card. There are two restrictions when you try to get one of the secured credit cards; you have to be at least 18 years old and you must reside in the United States. You are not subject to a credit check for the secured credit card, because your collateral is the money in a savings account.
Your credit limit is determined directly by the amount of cash deposited into your account; if you want to increase your credit limit, add more money which earns interest as long as there are no defaults on repayment.
One of the biggest advantages of having a secured credit card is when you add more money to raise the card’s limit, you also can earn more interest in the account. This idea is what secured credit cards such an advantage over unsecured credit cards: with limits on funds available for spending, you will avoid the problems created from serious credit card debt.
For many people with no credit or bad credit, secured credit cards can be a viable alternative; when used regularly and paid off promptly, these cards can be an excellent tool for building your credit score and possibly open more options to you, as a borrower.
Ally Cossgrove writes for the JSNet.org offering credit card comparisons with great offers including credit card offers for college students or just visit to read more of Ally's great articles!
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