Secured Credit Card Advantages

By: Mike Clover

Secured Credit Cards have many advantages for someone who does not have any credit, or someone with challenged credit. It is hard to do a lot of things without credit cards. In this article I will discuss why you need credit, and if you don't have credit or your credit is challenged, how secure credit cards will benefit you.

Establish good credit
One of the hardest challenges is to get a creditor to extend credit to someone that has no credit. There was a trick used for years, and that trick was having a family member ad you to there credit card as an authorized user. Recently the FICO® score model was changed because of the fraudulent use of selling authorized user accounts by credit repair companies. This motivated Fair Isaac to change there FICO® score model. So if you are added to a credit account as an authorized user, this can hurt your credit score. This loophole has been closed. The best way to get started in the credit building process or the credit rebuilding process is too get a secure credit card. Secure credit cards require a deposit into a designated account by the credit card company. This is the quickset way to start establishing good credit.

How much credit do you need?
Once you start building your credit, most creditors like to see at least 3 lines of credit reporting on your credit report for 12 months. The standard is getting 3 secure credit cards or at least two will suffice. Once the lines of credit have been reporting to all 3 credit bureaus for 12 months your credit score will start to appear or get better depending on your circumstances. Remember secure credit cards are just a way to get the ball rolling. After you have been paying on your credit cards with no late payments other credit card companies will start offering you credit cards with small credit limits. Typically they will extend around $1000 line of credit to you. With good history they will increase that limit over time. Your credit card balance should never be charged over 30% of allowed credit limit. Fair Isaac talks about this in their score model. Be careful with credit cards, they can consume you if you are not careful. You should never charge more on a credit card than you can pay off that month.

Payment History
If you have one late payment on your credit card, you just defeated the entire purpose of this article and the credit building process. One late payment will slaughter your credit scores. Typically your credit score will drop 100 to 150 points. So if you had a 720 credit score, you now have a 570 score. A 570 credit score will get you denied for all types of credit. So make sure your payment history is in good health. Never be late on anything. Make sure you get a copy of your free credit score report to see where you currently stand.

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