The secured credit card to rebuild credit is a viable solution when many other credit options have been exhausted.
The secured credit card to rebuild credit allows you to demonstrate to the secured credit card lender; you can, in fact, make your payments on time.
In this way, you may (eventually) receive a lower rate of interest with respect to other lending opportunities; or arrangements in the future.
How the Secured Credit Card to Rebuild Credit Works:
- You provide the secured credit card bank a sum of cash or money in the way of collateral.
- After your deposit, you are issued a secured credit card to rebuild credit. The credit limit is within a range of fifty to one hundred percent of the amount deposited.
- It is important you make consistent timely payments if you wish to properly re-establish your credit.
- In turn, the secured credit card to rebuild credit lender reports your improved payment activity to the credit reporting agency.
- The timely payments you provide the secured credit card lender allows you to build up your credit score; and shows other potential lenders you can effect a sound history with regard to paying on time.
There are some tips you may wish to employ when you make use of a secured credit card to rebuild credit.
The following content provides recommendations:
- Do not go over your balance or credit limit. The issuers of the secured credit card to rebuild credit generally provides a credit limit (again) to borrower of fifty to one hundred percent of what the creditor has deposited.
- You may use the secured credit card to rebuild credit in similar fashion as you would a non-secured card. This means you are also obliged to pay an annual percentage rate; commonly termed an APR.
- Assure your monthly use ratio of the secured credit card to rebuild credit is kept low or to a minimum. The credit use ratio equation is: outstanding debt divided by credit available is equivalent to credit use ratio.
- Pay each monthly balance in full. The payment in full each month will (subsequently) increase your credit score.
- A nice feature of the secured credit card is if your payments prove consistently timely; you may later convert the secured card to a standard credit card. This can occur within twelve to eighteen months of continual payments.
- Additionally, with regard to the preceding point, it is best you convert your secured credit card to rebuild credit to a regular credit card rather than opt in to re-apply for another standard card (after 12 to 18 months). If you cancel your former secured credit card; which you have converted to a standard credit card in favor of a regular use card with better terms; you run the risk of decreasing your credit score. For the time being: merely, convert the secured credit card to a standard use credit card in order to play it safe.