Bankruptcy might leave you wondering how to “jump-start” your credit. Both your credit score and credit availability. Secured Credit Cards can be helpful to improve a bad credit score. They can also help you start to build one from scratch. Sometimes, people need to re-establish a good credit record after it has taken a hit. Other times, someone might be just venturing out into the world of credit. This could be after finishing school, arriving from another country, or any variety of reasons.
A secured credit card is where you put down a deposit in order to get a credit card. Then, the credit card company holds that money as collateral for the credit car.
A secured credit card may start with only a small amount of credit. After a few months, it’s a good idea to ask for the available credit to be increased, or even, perhaps later, to have it switched to an unsecured credit card.
It is important to remember the two biggest portion of your credit score (or FICO score) are your on-time payments, and your credit utilization rate. The credit utilization rate should ideally only be between 20% to 33% of the credit available. For instance, whether it’s a secured or unsecured credit card, if the available balance is $1,000, try to not charge more than $200 to $350 or so on the card each month, then try to pay it in full. That way, you never pay any interest.
Some good places to start looking for quality secured credit cards can be with your bank or credit union. Other on-line sources for secured credit cards include Open Sky Secured Visa and USAA Secured Card.
Of course, you also want to be sure that the credit card company you select does report to the major credit reporting agencies (Equifax, TransUnion, and/or Experian).
Secured Credit Cards can be a very good beginning or re-building tool. After that, it helps to have an “installment loan,” which is where there is a set number of payments. This is usually a car loan, but can also be a secured installment loan in much the same way a secured credit card works.
Of course, another helpful tool is to get credit where you otherwise wouldn’t be able to get it on your own by having a co-signor. Sometimes, a relative may already have a credit card and can add you on as an authorized user, or a joint account holder. Again, the key is to make sure that company reports that debt to the major reporting agencies.
If your credit is already bad, it can really help to clear up all of your old debt first through a chapter 7 bankruptcy. This eliminates debts, which eliminates the late payments. To find out more about whether bankruptcy can help you, please feel free to view other articles on my website, or set up a free office consultation or phone call with me, Peter Blinn, for anywhere in and around the Marion, Sumter, Citrus, and Lake county areas.