Consumers who may have had a setback in their financial life over the previous months or years have sought out ways to rebuild their credit and, secured credit cards have been one method bad credit consumers have used for improving their FICO score. Obviously, the use of secured credit cards have aided consumers who may have had limited options to affordable credit sources, as simply building a better credit history through the use of making purchases and promptly paying off these purchases on credit is one of the more long-term methods that can be beneficial for keeping one’s credit history and score in good standing.
Financial advisers often point out that improving one’s score can also be accomplished with the proper use of credit card spending and repayment habits, but simply paying bills on time, keeping credit card debt down, and in some cases, keeping lines of credit open and increasing lines of credit can be helpful. However, these basic financial practices do require financial discipline on the part of the cardholder as simply letting one’s spending get out of control is one of the more common ways that a bad credit score can arise.
Consumers who feel that a secured credit card is going to be their best option when it comes to putting themselves in a better financial position in terms of their FICO credit score will obviously have to practice smart financial habits but secured credit cards require a deposit into a bank account which will set the card limit, and this can help better develop certain financial habits as cardholders will realize that if they do not properly budget and erase their credit card debt from month to month, they will lose funds from the secured account if payments are missed or they default.
Successful users of secured credit cards have typically been those who have shopped around and found the most affordable card for their financial situation with a reputable lender, made sure their card’s activity was reported to the big three credit bureaus, and simply made affordable purchases on their card and promptly paid off the balance from month to month. Yet, cardholders who were then offered unsecured cards were in a position where they could do even more to improve their credit score as these lines of credit may offer more options for cardholders who are attempting to establish a better credit history.
Yet, consumers who have multiple credit cards and want to improve their credit score and build a more positive credit history are, again, usually dissuaded from closing these accounts as the higher one’s potential lines of credit, when compared to a low level of debt on these credit sources, can also reflect well on one’s credit score. As an example, if a consumer has access to $10,000 worth of credit but only has $2,000 worth of debt, this is seen as a low credit utilization ratio and can reflect well on one’s credit score also.
While the use of a secured credit card is not a guaranteed quick fix to one’s bad credit situation, consumers wanting to better their FICO score can use a secured card as a tool to not only begin establishing a more positive credit history, but this can lead to other credit card offers, which when kept in check, can also allow consumers to continually build a more positive credit history throughout their life.