No Credit or Bad Credit:


So you have no credit or bad credit. You're not alone. One option you have is to get a secured credit card. A secured card will help you establish/build your credit so that in time you can get a regular unsecured credit card. What is the difference you ask?

Secured vs. Unsecured Cards

Secured and unsecured cards can be used to pay for goods and services. However, a secured card requires you to open and maintain a savings account as security for your line of credit; an unsecured card does not.

The required savings deposit for a secured card may range from a few hundred to several thousand dollars. Your credit line is a percentage of your deposit, typically 50 to 100 percent. Usually, a bank will pay interest on your deposit. In addition, you also may have to pay application and processing fees — sometimes totaling hundreds of dollars. Before you apply, be sure to ask what the total fees are and whether they will be refunded if you’re denied a card. Typically, a secured card requires an annual fee and has a higher interest rate than an unsecured card.

Credit Reporting


If you’re considering a secured card as a way to build or re-establish a credit record, make sure the issuer reports to a credit bureau. Your credit history is maintained by companies called credit bureaus; they collect information reported to them by banks, mortgage companies, department stores, and other creditors. If your card issuer doesn’t report to a bureau, the card won’t help you build a credit history.


 


Our Top Two Tips

Get a secured card from a major company. The majority of major companies file with the credit bureau. A smaller company may be less likely to do so.


Don't be afraid to call the company you are considering applying to and ask them any questions you may have about their secured card. The wisest move you can make is to know what you are getting yourself into. Sometimes things are not clear and the best way to find out is to ask someone.