For most Americans, credit is very important. If your credit needs to be rebuilt then a secured credit card is a great option. Secured cards are different from traditional credit cards because they don’t usually require hard credit checks.
Most secured credit cards don’t mind if your credit score is unusually low. Secured credit cards are also very beneficial because they tend to report how well you keep up with your secured credit card bill to bureaus for credit. The main three credit bureaus are Trans-Union, Experian, and Equifax. This is the key to rebuilding credit, most loan companies or lenders generate your credit information from these three credit bureaus. Rebuilding your credit with a secured credit card can be really easy, as long as you follow these tips mentioned in this article!
Use Your Secured Credit Card Modestly
It is important to note that a secured credit card should only be used for small purchases. Your secured credit card should be used for practical purchases only, including gas, inexpensive fast food items, or inexpensive household items. The trick to building your credit with a secured credit card is paying your bill in full when the bill is due. By doing so, you are showing the credit card company that you are financially responsible! Paying your bill in full each month also allows you to avoid expensive interest rates. This strategy has been tested and it is a great quick way to build credit.
More is Better!
If you are not able to pay your balance in full then don’t worry! There are other quick ways to establish a great credit history. When trying to build credit, you should always make sure you pay more than the minimum payment amount. Paying more than your minimum each will make lenders feel more comfortable to loan you money. This is a great way to fix credit because the amount of money you actually owe versus your credit limit amount will always remain slim.
Maintain Healthy Spending Limit
It is also important to note that with any credit card you may have, it is pertinent to only use 30% of your credit limit. If you are spending the entire amount of your spending limit it will negatively impact your credit score.Spending too much of your credit is a red flag because it causes lenders to assume you don’t have any money.
Choose a Smart Deposit
When shopping for a secured credit card it is important to choose one that fits your needs. With secured credit cards, you will be required to deposit the money up front for your spending limit. Some companies spending limits range from $200-$4,000. Since you will only be using this card to rebuild your credit, it would be smart to have a low affordable deposit amount. Experts recommend starting off with a $100-$300 deposit.
Paying on Time
Being on time with monthly payments is also very important in order to fix credit. If you have been late with payments in the past, then you should know that it has a negative impact on your credit history. If you have a hard time remembering due dates, you should sign up for auto pay.Autopay will automatically withdraw the funds from your bank account. With Autopay some lenders even will off cash back opportunities. Signing up for auto pay allows you to develop a trustworthy relationship with your credit card company, which is great.
Don’t have a Secured Credit Card?
If you happen to be reading this article and you do not have a secured credit card, don’t worry! Obtaining a secured credit card can be simple and easy. Most secured credit cards don’t have annual fees and an easy to apply for. Credit scores for secured credit scores can be as low as 350. Rebuild your credit score easily today!