Many cardholders have seen their credit score drop due to a variety of factors like unemployment or simple bad financial practices. However, when someone gets in a position where they can begin to rebuild their credit, a bad credit score often prevents them from getting access to the credit they need to repair their credit history or if they have unsecured credit cards, they may find that the interest rates on these cards are unmanageable.
Secured credit cards have been used by many people and businesses over the past months to begin the process of repairing their credit history and improving a bad credit score. While there is no easy way to increase someone’s bad credit score, a secured credit card can be useful when it comes to buying on credit, paying off those purchases, and slowly building a more positive credit history.
While many people may have developed bad financial practices over the years, which would account for their bad credit score, a secured credit card also requires that the cardholder develop better financial habits due to its specific nature. A secured credit card requires the cardholder to deposit money into a bank account that not only prevents the bank from taking a loss on any charges that may be made and not repaid, but it also sets the credit limit.
This means that if the cardholder makes charges on a secured credit card and does not paid them off, they lose money and do more damage to their credit score. It’s for this reason that individuals who are looking for a secured credit card must be in a position where they truly want to get their finances in order, seeing as how a secured credit card is no guarantee to a better score.
Anyone who may be looking for a secured credit card is often advised to shop around as there are a variety of reputable lenders that offer this type of credit card. Also, cardholders need to make sure their secured credit card, purchases, and payments will be reported to a the big three credit bureaus so that their use of the card will count toward their credit score.