Secured Credit Cards For Cardholders With No Credit History–Do They Help Establish A Credit History And Score?

Many consumers often turn to secured credit cards when it comes to repairing and restoring their credit score and history. Yet, there are also individuals who have benefited from the use of secured cards as a way to begin establishing a credit history and setting themselves on a road that will allow them to build a good credit score earlier in life.

There are numerous uses for secure credit card which have been beneficial for consumers in the past, particularly when it concerns a bad credit score and the need for access to credit. Consumers who have a poor credit score and are attempting to rebuild their credit history often have difficulty accessing affordable credit, or any credit it all, and secured credit cards are simply one way that bad credit borrowers have used to repair their credit.

Yet, for individuals who may simply be starting out in their credit life, such as college students, secured credit cards have been a way that people with no credit history have been able to begin making purchases and promptly paying off these debts so that they can start their credit life on a positive note. Then while access to credit may be difficult for some, again like college students who may need a parent’s permission before they can acquire an unsecured card, simply because new rules that are meant to prevent credit card companies from taking advantage of young consumers does not guarantee that credit will be used responsibly.

Secured credit cards require collateral, which typically comes in the form of a deposit into a bank account, before a credit limit will be set and a card issued. While this should not be mistaken for a debit card, secured credit cards can be set up so that the cardholder will have a limited line of credit which they may use to begin building a credit history, which can be helpful later in life.

However, since secured credit cards are typically not meant to carry a balance, cardholders who are attempting to build a credit history will have to be responsible with their purchasing habits, not to mention their budgeting as well, so that their entire balance might be paid off each month. While this is not a requirement for some secured cards, it has been away for young consumers to develop positive credit habits and budgeting practices which will not only allow them to more responsibly handle unsecured credit cards in the future, but will generally help develop money management skills which can generally aid in keeping a consumer’s credit score in good standing.