How to Rebuild Your Credit Using Secured Credit Cards

credit_rebuildHaving a poor credit score can be tough, it can make it difficult to borrow and get a credit. A poor credit score can still be saved though, this is by rebuilding your credit. However, the only possible way to rebuild a poor credit score is by getting a credit. This of course is very hard to achieve since your past credit mistakes will be looked into and with a poor credit score, lenders will implement a stricter rule for you plus they will ask for additional requirements.

Secured credit card is one way to rebuild your poor credit score. Secured credit card is a credit card that has a credit limit that is directly proportional to the security deposit made into the account. Secured credit cards are often used by people that has a poor credit score and needs to rebuild them or for people that have no credit scores yet and are yet to build one.

 How it Works

Secured credit card works just like the regular credit cards, you swipe it whenever you make a purchase. You can pay your purchases in installment and one-time payments. The only difference with the regular credit card and the secured credit card is the credit which is based on your security deposit. This is necessary for all secured credit cards to ensure that in case you cannot pay your credit, it can be deducted from your deposit.

What to Do

You need to do a research on which secured credit card company offers the best deal. Secured credit cards have a higher interest rate which means that if you fail to pay on time, you will greatly suffer paying the interest rate and the principal amount. Here are some of the things you want to keep in mind when looking for a secured credit card.

  • Always go for card that offers minimal interest rate and fees.
  • Read before you sign. Make sure that you understand their terms and conditions before you go with the card institution.
  • There are financial institutions that would allow their secured card holders to graduate into unsecured card holders. They will even return the security deposit once you have made timely payments on your account.

How to Improve your Credit Score with Secured Credit Cards

  • Pay on time, this is always the best practice on improving your credit score and as well as avoiding the high interest rate.
  • Increase you credit limit by making additional deposits if you can. This will make your credit appear that you are capable of making large payments. Just remember that you need to mark a line for your limit and not overstep it. A secured credit card is a good way to rebuild a poor credit score, but when used incorrectly it can make your credit score worse.
  • Maintain a low balance.
  • Keep and use your secured credit cards as long as you need it. Once you have rebuilt your credit score, you can now close your secured credit card and go back to regular credit cards that offer lower interest rates, minimal fees and higher credit limit.

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