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Secured Credit Cards 9/21/09
One of the best and easiest ways for people with damaged credit to build “new” credit is to open a secured credit card and use it responsibly. A secured credit card is an account opened through a bank or credit issuer that uses a deposit of money as collateral. This deposit is the credit limit on the account. This is a great credit building tool for those who don’t qualify for an unsecured credit card because of low credit scores.
The best place to start out when opening a secured credit card is to contact a bank or credit union that you have a checking or savings account with. When opening this type of account there are some questions you should ask:
1. Do they report to all three of the major credit reporting agencies (TransUnion, Experian, & Equifax)?
2. Who is the card serviced through? ie: CITI, Chase, HSBC, etc.
3. What is the required deposit? It is usually at least $200 and can go up to $1000.
Once a new secured credit card is opened, I recommend using it regularly in order to generate a bill and then making your payment on time every month. This will help to build payment history which accounts for 35% of your credit scores. Also, be sure to focus on keeping the balance below 10% of the limit (the deposit of collateral). 30% of your credit score is determined by your debt utilization ratio (the balance on the card divided by the limit). Again, keeping this number below 10% will help to optimize the chances of having the highest credit scores.
Please contact me for more information.
Kevin D. Weier
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