Use Secured Credit To Rebuild Your Bad Credit
Good credit score is important to secure the best deal when you apply for credit. If you have damaged it due to any reason, it is important for you to rebuild it for future uses. There are a few ways to rebuild your bad credit, one of them is using secured credit card to create a clean history and regain a good score.
What is a secured credit card?
When you have bad credit, most probably you will not be approved with a regular credit card. However, you can go for a secured credit card, the one that requires the cardholder to deposit a certain amount to secure a credit limit. Normally, the limit may up to the deposit amount, but some lenders will limit it to as low as 50% of the amount you deposited. The creditors will use the deposit as security in case you default the payment. For example, you have deposited $1,000 to secured the card and your approved credit limit is 50% of the amount deposited, then you can spend up to $500 using this card.
Unlike the regular credit cards which may have zero fee, secured cards are usually have various fees which includes application & processing fees and annual fees. So, when you search for a secured credit card to rebuild your bad credit, beware of cards with high fees because they can greatly reduce your credit limit because the fees normally are deducted directly from your deposit amount which will reduce the deposit amount and leads to a lower allowable spending limit.
Take advantages of secured credit card
If you have damaged your credit, one way to rebuild it is through the demonstration of your improved payment habits. However, you can't show that you are able to make timely payments if you are not approved with a card. Hence, your first to rebuild your bad credit is getting a new card and secured credit is a way to go since you may hardly get approved for a regular credit card.
Since your purpose of getting a secured credit card is to get your payment activities to be reported in your credit report. Hence, you should always make sure the creditor reports to all three major credit bureaus before you apply for the card. If not, you won't be able to take advantage of the card to re-establishing your credit.
After you have been approved with a secured credit card, use the card the build a positive credit history by using it to make small purchases which you afford to pay in full when the monthly statement arrive. Make sure you pay it on time and in full so that your good payment habits can be recorded into your credit history.
After you have used the secured credit card for some times, say about 1 to 2 years and make timely payment all the time, you may want to try to apply for unsecured credit card. If your still being rejected, don't repeatedly apply for it because this will make you look desperate for credit. Instead, continue to use the secured credit card to make small purchases and make timely payment for another six months before applying again. Keep repeating the process until you are being approved with unsecured credit.
Summary
It is important to have good credit score to secure the best deals when you need it. If you have damaged it, it is important to rebuild it again and you can take advantage of secured credit card to rebuild it.
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