How to Re-establish Credit with a Secured Credit Card
If you ever ruin your credit with a bankruptcy, collection accounts, judgments, liens, foreclosure, or legal action you may have to re-establish your credit with a secured credit card. This type of credit card has terms and conditions that are different from your average credit card. You are going to find that every bank or lending institution does not offer secured credit cards.
Terms
When you apply for a secured credit card you will have to open a bank account first, with an initial deposit of $300 to $500. Your credit limit will be the amount of your deposit which is also your security for the credit card. If you are ever late with your payments the payments will be taken from your bank account. These payments are not taken from your bank account if your account is up to date. You may qualify for a credit limit increase at some point in the future. When you make your payments on time for a period of one year some banks will allow you to get a credit card which is not secured. A secured credit card will usually have an annual fee and a high interest rate.
Credit History/Score
The good thing about a secured credit card is the fact that they help you to re-establish your credit. It's a good idea to determine if your credit information is going to be reported to the three credit reporting agencies, which include TransUnion, Experian, and Equifax. If the information is not report to at least one of the credit reporting agencies it does not help you to re-establish your credit file. The fact that you have to re-establish credit means that your credit score has probably been reduced substantially. As time goes on you will be able to increase your credit score by making your payments on time. If your payments are late it will take longer to re-establish credit and the card issuer may increase your annual percentage rate, (APR). Always pay off your purchases. Avoid carrying a balance if at all possible. Credit scores range from 300 to 850 and lenders use this score to see determine the likelihood that you will default on a loan or other credit product.
Options
Before you apply for a secured credit card you may want to check with several banks to see which has the most cost effective terms and conditions. Getting a card with the best terms will save you money in finance charges. Some banks will charge an application fee and some will not. Avoiding this fee will also save you money.
Source
http://www.bankrate.com/finance/credit-cards/10-questions-before-getting-a-secured-credit-card-2.aspx
Source: http://www.bad-credit-advisor.com/2009/01/us-bank-secured-credit-cards.html
Published by Melvin Richardson
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