I think they can be if you use them correctly. It can be a good way to build credit, but you have to be careful and look at all the fine print. Interest rates and surcharges can be ridiculous.
by missweber1 - 11 hours ago
Yes, a secured card can help your damaged credit history and FICO credit score. Yes, it is more expensive to use than a non-secure card. If your credit is damaged enough, a secured card may be the only kind of card that lenders will grant you. Look at it as a chance to start building some good credit history on a report that lacks good history. Imagine doing something good for your credit history while you wait for the damage to fall off your credit reports after 7 years (10 years in the case of a Chapter 7 bankruptcy). You have FICO credit score points to win for new, good behavior. Plenty of companies WILL give you a secured card to use if you meet their terms, and that usually means paying more fees than someone who has good credit history. A good plan: You can start with applying for and getting a secured credit card, and demonstrating good payment history for 6 to 12 months. Pay on time, every time, and you'll improve the 35% of your FICO credit score that is based on your payment history. Compare terms on secured credit cards at bankrate.com which is a firm I have no legal or financial interest in. Call up the secured cc company and ask whether they routinely report to all 3 Credit Reporting Agencies (CRAs) so that you'll build up credit history with all 3 CRAs. If the secured cc company doesn't report to all 3, find another card. When you choose a card, be clear, BEFORE you apply, on every up front, monthly, and annual fee they will charge you. Call up and ask questions if necessary. You'll be way ahead of the game if you read the Terms and Conditions (i.e., the fine print), too. In order not to hurt your FICO credit score, your balance should not exceed 30% of your credit limit. In that first month, you'll see those fees on your bill, so don't run out in the first month and charge more than a few dollars (i.e., more than $5) on the card until you read that first bill. Make small purchases and pay them off in full, every month. Myth-busting fact: you do NOT have to carry a balance and pay interest to develop a good payment history. You can score just as many points by making a small purchase and paying it off in full each month. Open online account access with the cc company so you can watch your bill and make payments online. After 6 to 12 months of paying on time, every time, try for an unsecured card, one that has no upfront or annual fee. In some cases, your secured lender might allow you to convert to an unsecured card. And return your deposit :) That newly-converted-to-unsecured card is your oldest open account that has nothing but good history on it. This card will boost the 15% of your FICO score that is based on length of oldest open account, the older the better. Again, ask about fees. See whether they'll waive annual and purchase fees so that you can keep it open and use it at no extra charge. Pick a card that is a "major", i.e., MasterCard, Visa, AmEx or Discover. Make sure it has rewards based on things you need, rather than things you just want. A gasoline-and-auto-repair rewards or groceries rewards card is often a good choice. Please vote: Did this help?
by VT - 11 hours ago
Well, if you pay a thousand dollars, they will give you a secured card for 500 bucks. If you miss payments, it does not come out of your deposit, instead it further damages your credit rating. And it does not imporve your credit score one bit.
by ? - 11 hours ago
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