Secured Credit Cards Your Ticket to Higher Credit Scores
Owning a secured credit card can be one of the most effective ways to raise your credit
In order to obtain a secured credit card you simply deposit a sum of money into a savings account which is held as security against charges you’ll make on the card.
Some question the reason why anyone would want such a card – when they have to put up the money ahead of time to get it. One reason is convenience.
As long as you aren’t over-limit, a secured credit card will be accepted in places where a check is not. So if you don’t have the cash in your pocket, you can still make a purchase. And of course, when you want to save money by shopping on line, a credit card is a must. It’s true that you can use services such as Pay Pal by accessing your checking account – but since merchants have to wait several days for payment, not all will accept that form of payment.
The second reason is that using that secured credit card will help you build a good credit score.
By keeping your purchases under 30% of your credit limit and paying every statement as soon as it arrives, your credit scores will begin to climb. The savings account itself is a boost to your credit rating too.
When you have consistently “paid as agreed” for a period of time, you can contact the credit card issuer and ask to have your secured credit card upgraded to an unsecured credit card. At that time, you’ll get back the savings account money, with interest. But since having a savings account as well as a checking account does increase your credit scores, you should continue keeping that money in a savings account. Adding to it regularly is also a good move.
Once you have established your ability and willingness to pay your accounts on time, you’ll be able to ask for a higher credit limit, which will also increase your credit scores.
Remember to limit your use of the secured credit card – and later the unsecured credit card – to 30% or less of your credit limit. Even if you pay the balance in full each month, the balance at the time the statement is issued is what goes on your credit report. You don’t want your credit report to show that you have “maxed out” on any credit card.
