Rebuilding A Bad Credit History Through Credit Cards–Are Consumers Benefiting From Secured Credit Card Use?

Credit card debt has been a problem for consumers over the past months and, along with other debt obligations, numerous factors have caused consumers to miss payments or become delinquent on their debt, and this has obviously led to a bad credit score. Yet, individuals who have found themselves on a firmer financial ground have begun the process of repairing their bad credit history and rebuilding their low credit score.

However, some have seen their opportunity to access credit dwindle due to the drop in their credit score. While bad credit borrowers may have a few opportunities to gain access to a line of credit, which can be used to rebuild their bad credit history, many have turned to secured credit cards as a way to begin spending and repaying debt, so that they can improve their credit history.

Secured credit cards, though, do differ somewhat from unsecured cards and may not be beneficial for every bad credit borrower. Collateral is required before a secured credit card may be obtained, but this is usually in the form of a deposit into a savings account which secures the card and sets the credit limit. Obviously, this is helpful to some as it forces them to practice smart spending and repayment habits, since failure to repay debts on a secured card will result in the loss of money from the secured account.

Yet, over the past months individuals who have used secure credit cards to their benefit have been able to make purchases with this line of credit, promptly pay off their bills from month to month, and as a result have been able to build a better credit history. When looking for a secured credit card, however, advisers have often suggested that consumers shop around, be sure they find a reputable lender who will report their card activity to the big three credit bureaus, and obviously get a card that will only charge minimal interest and fees.

While times are difficult for many, concerning their personal finances, those who have been able to rebound from the economic downturn and begin the process of repairing their bad credit score have benefited from secured cards, and there are some financial institutions who will also offer secured credit cards down the road if a bad credit borrower proves they can handle the responsibility.

Yet, when it comes to maintaining a good credit score, advisors simply suggest that cardholders spend within a budget which allows them to fully repay their credit card charges each month, as this can cut down on interest payments and can help cardholders avoid difficulties that may arise with a card that continues to carry a balance.