Establishing or Repairing Your Credit: Credit Cards are Your Key
Are you having problems qualifying for a credit card? Cash secured credit cards are obtainable by anyone and are a great stepping stone to greater financial freedom. They’re also key tools to use if you need to establish or reestablish damaged credit.
Plenty of situations may arise in your life that make it difficult to obtain a standard credit card: bankruptcy, a poor credit history, divorce or no credit history at all. If you find that it is impossible to qualify for a credit card, a cash secured credit card could be the answer to your needs; they give you a guaranteed chance to build (or rebuild) a credit history, setting you up for more advanced credit products.
A secured or prepaid credit card is usable in all applications where a standard credit card is accepted; the difference is that with a prepaid card the charges are backed by money that you deposit before you use the card. Banks differ in the amount of money that they require up front, but the amount is usually between $0 and $500. As you might imagine, cards that require smaller balances usually change greater fees for account maintenance than those cards that require balances up front, but they give you the opportunity to build a positive balance incrementally, spreading out the initial outlay of cash.
Here’s the important part: even though a prepaid credit card is funded by your own cash, the issuer reports your usage of the card and payment information to the three big credit bureaus just as standard credit vendors do. So – with a Secured Credit Card you are guaranteed acceptance, and you have the chance to demonstrate your willingness to make your payments on time. This will have a swift positive impact on your credit score. Don’t forget: it’s important to maintain the account, make your payments on time and keep the balance at an acceptable level.
After you’ve used and maintained a secured credit card for twelve or more months, and have maintained good payment performance, your credit card vendor will give you the opportunity to convert your prepaid credit card to a standard credit card. Continue maintaining your account and you will build or rebuild a healthy credit history that you can continue to expand on with increasingly flexible credit products. In a future article I will describe how you can build on the credit that you establish with a secured Credit Card.
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