Bad credit can mean a long road with an unhealthy financial future if you don’t take care of quick. You might find it difficult to get new credit if you’ve run into financial difficulty that resulted in a bad credit history.
Those prior mistakes can create havoc and become difficult to move past, especially when new creditors are unwilling to give you a second chance. What do you do when you need to re-establish your credit, but everyone is unwilling to take a second chance?
Your first response should be getting a secured credit card. Secured credit cards are practical options, and with so many on the internet you should review these credit card offers to see which ones will be advantageous to you.
What is a secured credit card?
Secured credit cards (or simply secured cards) operate like a regular card, however they are meant to be a credit card for bad credit. The only difference is that you must make a deposit that will be held in a savings account against the credit limit on the account. The bank will use the deposit as security, just in case you default on your payments.
What are the costs?
Unlike many regular credit cards, you’ll find that secured credit cards have some upfront costs associated with them. The more common costs will include application fees, processing fees, annual fees, late fees, and credit limit increase fees.
You should review each cards cost before the application process. Don’t bother with the cards that have high fees that use most of your security deposit. These tend to milk you for all you’re worth just to get a favorable trademark on your credit report. What people overlook is that the fees begin to add up, in additional to the amounts you owe. This is not advantageous to you, since you’re paying more money than you have to.
How much will my deposit be?
Secured credit cards are “secured” with a deposit that’s held in a savings account and to be used to cover any payments that you default on. You’ll find many secured credit cards have a minimum deposit before you can receive the card. This can range anywhere from $250 up to $500. We have many more Credit Repair Articles Now Available.
Many banks will place those secured deposits into an interest bearing savings account, while others do not. Start out applying to those banks offering interest bearing accounts first. Why not make money on the secured deposits their holding for you?
Are there any restrictions or eligibility requirements?
Most secured credit cards are very flexible with eligibility requirements. Income and age restrictions are more likely to be the restrictions you run into. Typically, banks will still request a credit report to review your delinquencies. If you’ve had a secured credit card before that you defaulted on, this will weigh heavily in the decision process.
What will your credit limit be?
Secured credit cards are loosely based on your security deposit. There are some banks that will offer you an increased limit based upon your deposit. For example, if you deposit $500, you may be eligible for a limit of $750. This depends upon the banks guidelines and your prior credit history. More than likely, your credit limit will be equal to your deposit amount.
Are payments reported to credit bureaus and how often?
Secured credit cards were invented for this very reason. Most banks offering these cards will report payments every 30 days, however, you do have a number of lenders that only report your payment history every 3 months. This will make a difference if your goal is to rebuild your credit quickly.
If you’re looking to get some positive history in a short amount of time, look for those lenders reporting timely payments every 30 days. In 6 months you will have shown good payment history and mature responsibility.
Can the card be converted to an unsecured credit card?
The best secured credit cards will eventually allow you to convert to an unsecured card. Many lenders offer this after a period of 1 year. We have many more Credit Repair Articles Now Available.