A Good Credit Score

A Good Credit Score

What to Expect from a Secured Credit Card

If you’ve ever tried to rent a car or book a hotel room without a credit card, you know it can be a challenge, not to mention trying to buy something online. But what can you do if you literally can’t get approved for a credit card? There is an option–a secured credit card.

Secured Credit Cards: The Pros and Cons

In many cases, you can get a debit card from your bank that works as a Visa or Mastercard. However, a debit card only draws money directly from your checking or savings account, it doesn’t provide you any credit. You’re only using your own money, not the credit card company’s, so you can’t improve your credit score. When you use a traditional credit card, you show creditors that you’re trustworthy. This is vital to pumping up your low FICO score.

A secured credit card is sort of a hybrid of a debit card and a traditional credit card. First you give the secured credit card company a sum of money, which you do by opening a CD (certificate of deposit). This money deposit is the “secured” part of your new credit card. It works like traditional credit card, and the payment information is reported to the credit bureaus, but if you fail to pay your bill, the credit card company can take your CD to cover their losses.

What to Look Out For With Secured Cards

You should be aware that while a secured credit card will help you improve your credit, some card companies include the information that your card is secured. This means creditors can see that information and they might not look on you favorably. You should always ask how the information is displayed on your credit report. Credit card companies that offer unsecured cards as well are usually more likely to report your card like a regular credit card.

Also make sure that you do a little research before you hand over money to a company. If you are planning on using a company that isn’t a national company that you’ve heard of before, check with the Better Business Bureau before you open an account. If the company has several negative reviews, you might want to look at another company. In this day and age, you can use the Internet and find several competing offers. Make sure you choose the one that’s right for you, and you can start rebuilding your credit today!

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