Consumers who are in need of assistance when repairing a bad credit score often turn to secured credit cards as a way to access a line of credit which can be used to begin repairing their credit history and reestablishing a positive credit score. Obviously, there are ways to rebuild a bad credit score outside of secured credit cards, but many consumers often feel that secured credit cards are one of the more affordable ways to repair a bad credit score as interest rates can be quite low on secured lines of credit.
However, cardholders must understand that a secured credit card, simply because it is backed by a secured account or collateral does not lead to a low interest rate. Obviously, bad credit borrowers may have to handle a higher percentage rate on some forms of credit until they can repair their low credit score, but when it comes to secured credit cards and their interest rate, these lines of credit can be much more affordable than unsecured credit cards offered specifically for bad credit borrowers.
There are some consumers who turn to secured credit cards when their credit score has dropped simply because interest rates on an unsecured credit card has increased or bad credit credit card opportunities are simply too costly. While, again, an interest rate on a secured credit card can be affordable, rates usually run around 12% to 20% or more, depending on the lender, a cardholder’s situation and credit score.
It’s for this reason, that financial advisers have suggested that consumers do a fair amount of research and look at multiple secured credit card options when seeking out a line of credit which they may use to repair their bad credit. There are many reputable institutions and well known banks which can offer a secured credit card to a bad credit borrower, which can be used to either establish credit or, again, repair a bad credit score.
Yet, cardholders must seek out a reputable institution, an affordable secured credit card, and be sure that their credit activity will be reported to the big three credit bureaus so that there credit score may benefit from proper secured credit card use. Also, cardholders may want to avoid offers for secured cards which may come with excessive fees, as there are some great cards which may eat into a cardholder’s secured account funds and this will obviously create a more difficult situation for a cardholder attempting to increase their bad credit score.
However, despite the fact that secured credit cards are offered at affordable rates from numerous financial institutions, proper use of a secured credit card must be implemented because, no matter if a card comes with a low rate, keeping a balance on this card or failing to budget properly could result in higher costs, missed payments, or further damage to the cardholder’s credit score.