Secured credit cards assist people with no credit or bad credit to improve their score. Here is what you need to know.
Secured credit cards establish credit in easy manner
One of the ways to building a credit history is to start using credit cards. When you timely repay credit card dues, credit cards establish credit history against your name.
When seeking a credit card, know that secured credit cards establish credit easily. These cards are quickly approved despite no credit history or bad credit record. This is because the card issuing company covers the risks by taking a security deposit from the applicant. The security deposit amount works as collateral to cut the risks for the credit card company. The deposit amount you put will be your credit line. However, the deposited amount will not count towards the payments that you need to make to the credit card issuer company.
Do not worry about the security deposit when you know that secured credit cards establish credit. You can deposit only a minimum required deposit since your main aim is to build credit and not the purchasing. All you need to ensure is that you make only smaller purchasing. Such lower amount of purchasing will ensure that there is not burden on your smaller income when it comes to repaying the credit card dues. This way, you can always repay the dues in timely manner, and you can build a good credit history.
A secured credit card is like any other traditional credit card. You can use the secured card for daily purchasing and for the transactions that do not accept debit cards or cash. Gradually, as you timely make the payments, these credit cards establish credit for you. Do no forget to make your monthly payments towards the secured credit card.
It is now clear to you that secured credit cards establish credit. But you should also note that these cards are periodically reviewed. If your credit behavior is good after you make timely monthly payments, you can qualify for unsecured credit cards and you can get back the collateral deposit. A good credit record in your name is helpful in getting mortgages at lower interest rates. So, be a responsible credit card user by regularly making the payments to start building a good credit for you.
Advice to maintain a good credit record
1. Do not overspend beyond your limited earnings
2. Use cash instead of credit card as preferred way of paying your shopping bills
3. Make it a habit to clear credit card dues without delay.