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Important Points When Using Secured Credit Cards

Using the wrong credit card, the wrong way, can actually hurt your credit rather than repair it.  Here are a few tips you should consider:

Never use a credit card that advertises “everyone is approved.” These credit cards loaded with fees and do not offer you the chance to increase your credit limit. Often, you will end up with paying $100 in fees for a $300 credit limit.

Consider Secured Credit Cards. To repair your credit you must exercise some financial responsibility. Secured credit cards have much lower rates and fees. But, you do have to make an initial deposit. This deposit will be your new credit balance.

Increase Your Credit Line With Additional Deposits. If you select a secured credit card as a means to rebuild your credit, begin with a $300 deposit and make additional small monthly deposits to the account. This will allow you to increase the credit limit and create a savings account for yourself. As your credit limit rises so will the influence and credibility the credit card makes on your overall credit report.

Do Not Use Your New Credit Card For Anything. When the card arrives, cut it up immediately after you activate it. Pay the annual fee each year and forget about it. The variables on the credit report that influence and help to establish credit are, length of time the account has been open, the credit limit, the balance vs. the credit limit ratio and of course the payment history. Using the card does not rebuild your credit faster. You are trying to repair your credit. Debt is what got you into this mess in the first place.

Do Not Let Your Balance Exceed 50% Of Your Credit Limit. OK, you did not take my advice. So, if you use the credit card, do not let the balance exceed one-half of the limit. The credit card company will report this fact “Maxed” out credit cards are viewed as a liability to your credit score.

Get A Second Secured Card And Repeat The Steps. If you get a second card, AND DO NOT USE IT, you will now have two credit references with zero balances. Use a different bank for the second account so that you have more than one company making positive credit reports to the credit bureau.

Remember these steps as you use your secured credit card to rebuild your revolving credit.

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