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Secured Credit Card Raises Credit Scores

By Brian Anderson
Published: Tuesday, August 10th, 2010

12Credit scores have meaning to the credit industry. That means customers, lenders; insurance brokers and credit related companies look at credit scores with respect. Issues on the credit scores may have become frustrating, but new developments have crushed the bafflements. There are plenty of credit scores and many of them are relied on because of their accuracy and applicability. The increased reliance on scores has also increased the concern of customers about their credit behavior.

What about those customers who haven’t had any score? Though it is wise to say that, if you don’t want financial trouble, don’t do credit, it is never illegal to apply for one especially when money becomes a necessity. So what can they do?

Three words in one term: Secured Credit Cards.

Security credit cards require lesser eligibility requirements than ordinary ones. Income, age, existing bank accounts and enough cash for deposits are the common requirements. Customers don’t have to present their credit card history to the lender to have the credit approved. Lenders just need enough information that will prove the customers’ capability of paying the interest and principal payments. Secured cards work this way: the customer makes a cash deposit in an account that will be strictly applied to payments that the customer will have defaulted. In that way, the lenders will be secured, the customer credit history will look good and both parties will be happy. Customers may even opt to deposit their security deposits in interest-bearing accounts to increase their security amount. It will make the cash payments history better and it would even produce a good credit score.

Customers with a bad score or credit history can avail of the bank credit secured credit cards. The process is the same; customers will have to deposit cash as collateral and have the deposit take care of their future defaults. In that way, their credit history is repaired, the lender gets paid and both will be happy.

A good credit history awaits the customers who have made use of their secured credit cards well. Customers can have their secured credit cards upgraded to normal credit cards. Normal credit cards or unsecured credit cards have lower APR than secured cards. They also have higher credit limits and have terms that are more lax than the secured cards.

Just a few warnings while building up or rebuilding a credit history. Customers must never forget to report their credit card payments to the credit bureaus. This will enable the bureaus to update the credit reports and the credit scores. Secured credit cards also require more fees. Annual fees and application fees are the typical ones. Aside from the deposit required, customer must also come up with more money to pay these fees. However, secured credit cards are still the best cards to avail when repairing or building credit history. In the long run, customers will certainly see its good side.

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