Many cardholders have seen their credit score drop over the past months due to various difficulties, most commonly related to unemployment, but sometimes associated with poor financial practices. However, there are many financial lenders who are offering secured credit cards as a way to increase a bad credit score by building a better credit history.
There are numerous accounts that secured credit cards can be beneficial, but many cardholders who may be unaware of how a secured credit card can help are often wondering how cardholders over the past months have used secured credit cards to repair a bad credit score. Secured credit cards are similar to unsecured cards, meaning they offer the same advantages and can be used in a similar manner, but these cards are more accessible to those who may have a poor credit score and bad credit history.
A secured credit card requires that the cardholder deposit a sum of money into a bank account which will secure the lender against any loss if the cardholder fails to pay charges they have made or defaults entirely. Once the cardholder understands that by making irresponsible purchases and not paying off their charges they will still lose money and do further damage to their credit score, anyone who uses a secured credit card wisely may be able to benefit.
Some individuals with a bad credit score have gotten into a position where they can make purchases on a credit card and promptly pay them off, which helps to rebuild one’s bad credit score. However, interest rates on some unsecured cards may be unmanageable if the cardholder has seen their credit score drop due to nonpayment or defaults. Once a cardholder has gained control over any debt that may have caused a poor credit score, as using a credit card to rebuild a credit score if the cardholder has outstanding debt may not be helpful, a cardholder can begin making purchases on their secured credit card, and promptly paying them off in order to build a better credit history.
While using a secured credit card may seem simple, there is no guarantee that this card will rebuild one’s credit score. While many reputable secured credit card lenders will report credit card activity to the big three credit bureaus, only by using a secured credit card wisely and responsibly can the cardholder benefit. Cardholders often have to develop better financial habits and practices when using a secured credit card and paying off their charges. However, these healthier financial practices can not only be beneficial as it will help the secured cardholder repair their credit score, but they can also develop habits that will be beneficial for a cardholder when they are able to return to using unsecured cards and when keeping their credit score high in the future.