Can A Secured Credit Card Make Your Credit Rating Higher?
Written by bmlengel on March 16th, 2010
Unsecured credit cards offer most people a simple means to build up their credit history, since no collateral is required to use it; however, if you do not have good credit, your chances of getting approval on an unsecured credit card are also not good.
If you have a less than stellar credit rating, you may have a better chance to obtain a credit card that is secured. Secured credit cards are different than unsecured credit cards, in that they require collateral in the form of a cash deposit, which is then placed in a savings account monitored by the card issuer, to give security on the credit card account.
The payment history on unsecured credit cards is constantly monitored by the three major credit bureaus, however, according to each individual company’s policy some secured credit cards do not report their payment histories to these bureaus.
If you decide to use a secured credit card to raise your credit score, the best move to make would be to pick one that reports its payment history to the credit bureaus. They may or may not be listed on the application form, but the benefits of using a secured credit card in this way may be further explained by the company’s customer service department.
Raising your credit score is easy for you to do if you use the secured credit card to buy whatever you may be needing at the time and being sure you are making payments on time.
The secured credit card is different from a standard credit card, because if payments go into default, they are collected from the balance you have sitting in your savings account.
It is easier to get approval for a secured credit card than for other forms of credit cards because there are fewer obstacles in the way. There are two restrictions when you try to get one of the secured credit cards; you have to be at least 18 years old and you must reside in the United States. There is no required credit check done, because your credit card is secured by collateral, in the form of money in a savings account.
Your card’s credit limit is determined by your savings account cash deposit, so if you are interested in increasing that credit limit, you merely deposit additional funds and this cash will also earn interest as long as you avoid defaulting on payments.
One important advantage to having a secured credit card is the opportunity to earn additional interest on the money added to the savings account to increase the card’s credit limit. This idea is what secured credit cards such an advantage over unsecured credit cards: with limits on funds available for spending, you will avoid the problems created from serious credit card debt.
For those people with bad credit or no credit at all, a secured credit card may be a very good option; when you use them regularly and stay current with every payment your credit score increases and in time, you may even qualify for better interest rates and more benefits.
Ally Cossgrove writes for the JSNet.org offering the best credit cards with great offers including low interest credit cards or just visit to read more of Ally’s great articles!
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