Credit scores are critical financial tools in today’s society, so it can be problematic when your credit report shows a low score. Those with higher scores statistically get better interest rates and more favorable payoff terms than those with lower scores, which could mean the difference between hundreds, or even thousands, in added-on fees and interest rates.
So if you want to repair your credit quickly, consider adding another credit card to your collection. It sounds counterintuitive, but this new card might be more helpful than you think.
Let us introduce you to the secured credit card.
What is a secured credit card?
Are you looking to fix your credit score and don’t know where to start? A secured credit card may be the answer you are looking for.
Secured credit cards are designed to help people with damaged or limited credit build or rebuild their scores. They’re different from traditional credit cards in that they require a security deposit, usually a few hundred dollars, which acts as collateral. This deposit is held until the cardholder is finished using the card.
How a secured credit card can help rebuild your credit
Since secured cards are often easier to get than traditional ones, they’re perfect for consumers with limited or poor credit histories. They also provide more flexibility regarding spending limits and can help you manage your finances.
With a secured card, you can develop a positive payment history and establish good credit habits. Plus, once you have paid off the balance of the secured card and improved your credit score, you should expect to get more competitive offers for unsecured cards and personal loans that can help you improve your score even more while still getting the money you need.
Plus, since you’ll receive the deposit back after closing the secured card, you’ll have a small emergency fund to start building your savings or paying off old debts that are still around.
What credit score do you need to get a secured card?
Generally speaking, secured cards are an option for those with bad or fair credit scores. If you’re looking to get a secured card, aim for a credit score of at least 500, but the higher your credit score is, the more likely you are to get approved for a secured card with better terms and conditions.
To ensure that you get approved with the best terms possible, you should work on improving your credit score as much as possible before applying. That means paying off existing debts, disputing any errors on your credit report, and limiting how often you apply for new credit.
What other options are there besides secured credit cards?
If you’re not interested in getting a secured card, consider looking for a card with a promotional 0% APR on balance transfers. That way, you’ll be able to transfer existing debt to a card with 0% interest and work on reducing your overall utilization, thus improving your score. However, balance transfer cards are typically unsecured and are harder to get approved for than secured cards for those with low credit scores.
Another option is a personal loan. These loans are typically unsecured (unless you can offer something for collateral) but have stricter terms and conditions than the average credit card. They can be a good option if you need quick access to cash but are unlikely to help you rebuild your credit score.
The bottom line
If you want to improve your credit score quickly, a secured credit card may be the perfect solution. With a few simple steps, you can repair your bad credit history and get the financial tools you need to build a brighter future.
Name: Keyonda Goosby
Job Title: Consultant