Financing For Bad Credit Borrowers–Secured Cards Being Used To Rebuild A Bad Credit Score

Understandably, many bad credit borrowers have difficulty finding financing opportunities that will allow them to access credit which can be used to rebuild their bad credit score. While there are some unsecured credit card offers available to bad credit borrowers, there are borrowers who are turning to secured credit cards as a way to begin the process of rebuilding a bad credit score. Secured credit cards are usually used by individuals who may be attempting to establish a credit history, as these cards which are sometimes referred to as prepaid cards, can reflect well on one’s credit score if used correctly.

In a video article by the Better Business Bureau it is outlined as to how secured credit cards can be beneficial to consumers who may have a bad credit score or who are simply looking to establish credit. Secured credit cards require that a deposit of money be made into an account, which sometimes gives the alternate name of a prepaid card, yet consumers are cautioned not to confuse a secured credit card with a debit card.

Secured credit cards do require that the cardholder provide money upfront before a card is issued, but the differences in some prepaid cards and a secured credit card is that the secured money which is deposited upfront is not used to pay off any of the charges related to the secured card. Rather, cardholders use a secured credit card like a traditional card, an unsecured card, and pay off these charges, interest included, from month to month.

Consumers who have benefited from secured credit cards when it comes to repairing a bad credit score have often made affordable purchases on their card from month to month and promptly paid off the balance. Secured credit cards are usually not meant to carry a balance, but even in cases where a consumer may have access to an unsecured credit card, leaving a balance unpaid can be hurtful to one’s credit score or their financial situation down the road as interest can continue to compile.

Yet, secured credit cards which have been sought out by consumers who have seen their credit score drop over the past months are no guarantee unless they are used properly. Obviously, many consumers have seen their credit score drop as a result of job loss or other financial difficulties, and in these instances a secured credit card may have been used to reestablish one’s credit history and score. However, since a secured credit card requires budgeting and financial responsibility, cardholders who are not in a position to acquire debt from this type of card and promptly pay it off are often advised against seeking a form of credit until their financial situation improves.

There are reputable financial institutions and well-established banks which offer secured credit cards, but again, consumers will ultimately be responsible for building a positive credit history, as a secured credit card is no guarantee to a better position concerning one’s credit score. Understandably, secured credit card seekers over the past months have been advised to shop around to find the best card for their situation, but also to find an offer from a lender who will report their activity to the big three credit bureaus. Yet, cardholders can still do damage to their credit score if proper the financial habits are not used which will not only help cardholders reestablish their credit score but will allow them to stay in a positive credit score range for years down the road.