Secured credit cards have been used by many consumers to either establish a credit history early in their financial life or rebuild a bad credit score which has resulted from either financial difficulties for mismanagement concerning their personal finances. Obviously, there are numerous credit card offers available to a wide variety of individuals, but when it comes to finding an affordable line of credit some individuals have trouble when a bad credit score is present or, in order to err on the side of caution, those who are looking to establish a credit history have simply turned to secured credit cards to begin the process of building a stronger credit foundation.
One of the main reasons that secured credit cards are used not only establish a credit history but also repair a bad credit score is the fact that they can be quite affordable for individuals who may be deemed to be a credit risk by lenders. Collateral is required for a secured credit card, and this usually comes in the form of a sum of money deposited into a bank account, but this money secures the lender against loss and sets the credit limit for this card, so the cardholder may be able to obtain a higher or lower credit limit depending on the amount they wish to deposit.
While reputable lenders must be found before a cardholder agrees to a secured credit card agreement, these types of cards are no guarantee to establishing a better credit history or rebuilding a bad credit score without proper use. There may be some fees associated with this type of card, but cardholders who do their research have typically been able to find an affordable secured credit card opportunity to begin creating a positive credit history.
Yet, successful users of secured credit cards have been those who have simply made affordable purchases on their card and budgeted their personal finances in such a way that has allowed them to pay off this debt from month to month. Many advisers suggest that cardholders do not carry a balance on a secured credit card as this could cause difficulties down the road and, when interest is factored in, could lead to a cardholder paying higher payments or, in some cases, even missing payments on their secured credit card debt.
However, individuals who have used secured credit cards wisely have not only been able to establish a positive credit history or repair a bad credit score, but many reputable financial institutions who not only offer secured credit cards, and report card activity to the big three credit bureaus, also will offer unsecured credit cards to cardholders once they have proven themselves to be a safe credit risk. Obviously, unsecured credit cards can come with a higher credit limit and can also be used as a valuable tool for helping a consumer continue to build a better credit history and credit score.