Good credit lets you unlock the best interest rates on all kinds of financing, from personal loans to auto loans, home loans, and credit cards. But what can you do if your credit score isn’t so great at the moment?
A secured credit card is a simple way to repair bad credit or to start building credit if you’re at the start of your financial journey. Read on to find out how to use a secured credit card to build credit.
A secured credit card means your credit union holds some of your savings as collateral in case you miss payments on your credit card. The amount of money you provide might determine the credit limit on your card.
Aside from the cash deposit, a secured credit card works just like a regular credit card.
The funds used to secure your credit card could be:
Secured credit cards are specially designed for people who want to get themselves onto the financial map for the first time, or who have made a few missteps and need to turn their credit around.
Here’s what you need to know about getting and using your secured credit card:
Building credit isn’t rocket science but there are definitely some things you can do to make sure your credit starts improving as quickly as possible–and keeps going in the right direction.
Make sure your credit union or other financial institution reports your payment history on your secured credit card to the credit reporting agencies. Here’s why:
You must make at least your minimum payment on time each month, so your credit score goes up and not down. Here’s what to do:
Another factor that goes into determining your credit score is how much of your available credit you use. Here’s how to use your secured credit card to build credit:
Before you apply for your secured credit card, it’s a good idea to find out your credit score so you know what range you’re in and what APR you might get. If you feel you’re in a good place, then gather up your documents and start shopping around for the best deal!
Remember–credit unions can often offer lower rates because they’re not-for-profit organizations. This means they can give their revenue back to members in the form of low-interest loans and credit cards as well as high-yield savings accounts.
Click below for more tips on how to get approved for your next credit card!