Credit Repair with Secured Credit Cards
The credit mistakes that you have committed in the past may have a negative influence on your future credit applications. This is especially true when creditors and lenders are harsh against the mistakes you have made and are unwilling to give you a second try. But, you should not lose faith when your credit report is damaged, because there are several alternatives that can help you recover it to better state.
One of them is the obtaining of a secured credit card. The conditions of this type of card require the holder to make a deposit of a specific amount, which will serve as the credit limit. The secured credit card has similar characteristics to the regular credit card, the deposit representing the major difference. The deposit is needed so that it serves as a guarantee against any default payments on the part of the card holder.
The credit limit you will be imposed varies from one company to another. However, it is usually from 50% to 100% of the deposit you have made.
Another difference between regular credit cards and secured ones, besides the deposit, is the fees that the card holder is charged. Some of the underlying fees include:
- Application fee
- Annual fee
- Processing fee
Before applying for any secured credit card, you should examine the levels of these fees and stay away from those that are too high.
If you have not been able to make timely payments on your credit, they will affect your credit report. However, if you apply for a secured credit card and obtain such, you will be able to fix the situation by showing your reliability as a borrower, who has managed to change his/her payment habits.
It is also advisable to select a secured credit card that allows for the transition to a regular one after a specific time period. If you have already selected one that doesn't include this option, rebuild your credit report and apply for a regular credit card.
Mind that you should select such secured credit card issuers that give reports to the three major credit reporting agencies. Otherwise, your efforts will be in vain since the potential creditors and lenders will not see your improved payment habits and your credit score will not reflect the regular and timely payments.
When you obtain a secured credit card, don't go back to your previous spending habits, which will increase your debt further. Don't forget that you have applied for it in order to fix your bad credit report. Buy things that you can cover in full at the end of the month. Don't live beyond your means.
Finally, the continuous and frequent credit card application may have a negative effect on your credit report. Thus, use your secured credit card to rebuild it and only after this make the necessary applications.
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