So you’re new to the world of credit because you’ve never borrowed money before through a loan or credit card. Whatever the reason, If you want a bright credit future you’ll need to start building your credit history as soon as possible. Even if you think you’ll never need to borrow money via a loan or believe you can pay everything off with your debit or ATM card, things can always change down the road.
A lot of young people have seen the detrimental effects of credit cards: high interest rates with the potential to drown consumers in debt. However, things may change when these same young people want to get a mortgage or an auto loan. Both of these loans will be determined by the person’s credit history and score, but if there is no history, they won’t loan out any money. By the time you need an installment loan, it becomes too late to start building a credit history.
This is where credit cards can come into play. Even if the credit card may not be used often, it’s still a great tool for two main reasons:
- Building a credit history.
- Saving it for emergencies.
However, like with the situation above, when it comes to any line of credit, creditors are hesitant to give credit to people with no credit history. Luckily, there’s a solution to start building credit right away: secured credit cards. A secured credit card is the ultimate tool to start building your credit history immediately and into the future. There are several differences between a regular credit card and a secured credit card to keep in mind, but the main thing to know about secured credit cards is they have a low
credit limit and require a deposit. Banks and creditors know that not everyone has a credit history or that they might have a poor credit history, so think of a secured credit card as a proverbial test of financial security and responsibility upon the customer.
Credit card companies and banks will require the customer to deposit a certain amount of cash to start a secured credit card. This can range from $100 to $500, depending on what the customer can afford. Whatever the deposit is, that will be the limit of the credit card. For example, if Bill deposits $200, he will get a credit card with a $200 limit. This may seem low, but again, this is a test by the credit card company to see if the customer is financially responsible.
Once you have obtained a secured credit card, it’s important to use it frequently but for small dollar items. Subscription services and the occasional pack of gum from the convenience store will do the trick. Be sure to never go above 30% of the credit limit of the card to maintain a good score. After about six months, the credit card company or bank could offer a full, regular credit card with a higher limit and a return on the deposit.
The whole point of securing these types of credit cards is to start building credit history rather than using it for all purchases. It’s important to plan ahead and wisely use a secured credit card.
And to begin your journey, we first recommend that you check with your bank to see if they offer secured cards. And if for some reason they don’t offer them or won’t lend you one, then feel free to check out the following links and see what cards fit your needs:
https://www.creditbuildercard.com/fixyourcreditconsulting.html
https://www.creditcardbroker.com/promos/feed5208
If you have any questions on building your credit history, feel free to give us at Fix Your Credit Consulting a call at (877) 212-2450. We will be happy to give you a free consultation and get you on track on building better credit.
If you have any questions, feel free to give us a call at 877-212-2450!
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