The Secured and Damaged Credit
Most people end up with a damaged credit when they
experience a financial difficulty. Having a damaged
credit can make it hard for you to obtain a new one.
Those credit mistakes you made in the past can be
nearly impossible to live with, especially when your
new creditors and lenders are reluctant to provide you
with a second chance. And so, in order to reestablish
your credit, but cannot obtain a credit card, you only
need to get a secured credit card.
The Secured Credit Card
The secured credit card is not that different from the
regular credit card. It operates just like the usual
credit card but it requires you, the cardholder, to
make a deposit against the credit limit of the
account. The deposit is utilized by the creditor as a
security in case you default on your payments.
Usually, secured credit cards have a credit limit of
50% to 100% of the deposit you make. For instance, if
you make a $1000 deposit for the secured credit card,
the credit limit will be between $500 and $1000.
More so, these kinds of credit cards normally have
fees that regular credit cards do not have. These fees
will include processing fees, application fees, and
annual fees. However, always be on the lookout for
those cards with high fees since they can
significantly decrease your deposit and eventually
your credit limit.
Taking Advantage of the Secured Credit
Damaged credit is the effect of having poor payment
habits, most of the time. If you cannot obtain credit
through traditional methods, secured credit can
greatly help you demonstrate improved habits in your
payments. Since you cannot prove a renewed capability
to make payments on time until obtaining a new credit
card, having a secured credit card is a big help.
However, before applying for one, you must guarantee
that the creditor reports to all the three major
bureaus for credit. Otherwise, the card would not be
beneficial in the issue of reestablishing your credit
for the reason that future creditors would not have a
process of looking at the history of your payment.
Additionally, it would not be incorporated in your
credit score or in your credit report.
If your application gets approved, always keep in mind
that your sole purpose for the card is to rebuild your
damaged credit and eventually create a positive credit
history. It is important not to use the card to incur
debt and instead, use the card to buy small things
that you can actually pay full in a month. Moreover,
it is important not to charge any item that you cannot
afford to pay on the card.
Managing your secured credit card and developing good
habits in payment can help you move into an unsecured
credit card. There are several credit card companies
that allow a consumer to convert to an unsecured
credit card after the course of one to two years of
timely payments. Even though you cannot change your
secured credit card, you can still submit an
application for an unsecured one with another company.
Remember not to repeatedly apply for credit cards
after you have been denied of an application; this
would only make you look desperate. What you can do
instead is to continue to make your payments on time
on your secured credit card and apply again after the
span of six months.
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