Traditionally, secured credit cards have often been used to rebuild or repair one’s bad credit score, but they are also a method which many consumers and businesses have used as a way to simply establish a credit history. While there are companies or consumers who may have little or no credit history who find themselves in a position where finding an affordable line of credit is difficult, these secured credit cards not only help men and women dig themselves out of a bad credit hole but have also been available to individuals who are simply starting out in their credit life and have needed an affordable way to establish a credit history which can be beneficial down the road.
Individuals like college students often have had endless access to credit cards in the past as there have been many companies who have attempted to offer cards on college campuses, which can be helpful to some, but traditionally has caused debt problems for many graduates. While there have been changes in credit card rules which have prevented students from gaining easy access to credit cards, there are some parents and even financially savvy students who have turned to secured credit cards as a safer way to establish a credit history.
While secured credit cards do have the same requirements for a borrower no matter if their purpose is to rebuild a bad credit score or simply establish a credit history, this means that borrowers will have to offer collateral before they can acquire this type of credit. Yet, for businesses who may be attempting to build a positive credit history or for students and consumers who may want to get their financial life on track early, this amount can be small and affordable, which has helped many to avoid excessive spending which, obviously, can create financial problems in the future.
However, smart spending, budgeting, and repayment practices which have been used by a secured credit card holders in the past have benefited these individuals and companies by simply allowing them to acquire a positive credit history, which has sometimes led to offers for unsecured credit cards with a larger line of credit and the opportunity to continue establishing their credit history and building their credit score.
Yet, financial advisers have still caution cardholders, especially those who use secured credit cards, to be watchful of their habits as there is no guarantee that a secured credit card will increase one’s credit score and history. Obviously, finding a reputable secured credit card lender who will report to the big three credit bureaus and not charge excessive fees is one of the first steps that a borrower must take, but also practicing spending habits which allow a cardholder to pay off their charges from month to month is one of the more beneficial methods of using a secured credit card that has helped secured cardholders in the past.