There are literally dozens of different reasons why you might be having a problem with debt. Maybe you’ve just had a costly divorce, a bankruptcy or are thinking about filing for bankruptcy due to your dismal credit history. Or maybe you just made some bad decisions about how you used credit. Regardless of what caused your problem with debt, you need to put together a credit repair plan to get your finances back where they should be. One good way to start repairing your credit is with what’s called a secured credit card. These cards can be helpful because how you handle them is reported to the three credit bureaus just as it would be with a standard credit card. This provides the opportunity for you to show improved performance on a new credit line. Plus, you cannot do that with either a prepaid or debit card.
Take a good look at your budget
Unlike credit cards, you need to make a deposit on secured cards to establish your line of credit. This can vary from $250 to $5000 or even more, depending on which company is issuing the secured card. Analyze your budget to determine how much of a deposit you could comfortably make. Also, think about the impact you would like to make on this new line of credit. In the event you have a bad credit score and a poor credit history for the past few years, it could be better for you to get a secured credit card that has a higher line of credit.
Be sure to comparison shop
There are numerous websites offering secured cards. Each will show current rates, special offers and the key benefits and of their cards over others. Take the time to analyze the different offers and try to find reviews of the different cards that are unbiased. Be sure to take a very hard look at the fees and terms of each. Crucial things to look for when comparing various cards include application fees, annual fees, deposits required and options for increasing the line of credit.
Check with a credit union
It’s likely that you can find a secured credit card with low interest at a credit union, which can also be a valuable resource when you’re trying to rebuild your credit. Call a credit union and make an appointment to see about their secured card rates and terms and what options they might offer to help your repair your credit.
Pay off your debts as fast as possible
After you have used your secured credit card for some time and want to see a nice upturn in your credit score, pay off as much of your existing debt as you can. You can improve your credit score significantly just by carrying less debt.
Make a record of your purchases
Since your objective is to show creditors that you can handle credit responsibly, be sure to record all the purchases you make with your secured card. And make sure you pay off your balance in full each month.
Make more than the minimum payment
If there is some reason why you can’t pay the full balance on your secured credit card by the end of a month, at least make more than the required minimum payment. The goal is to pay off your balance as fast as possible so that creditors will see you are acting responsibly with your credit line and could handle bigger purchases without getting into trouble again. Also, don’t wait to make your payment until the due date. Try to make the payment one to two weeks in advance of your due date or at least have it posted then.
Never miss a payment
Make sure you never miss a payment by keeping good track of your credit card statements and due dates. If you miss a payment on a secured credit card, it will show up on your credit card and will definitely damage your credit score. You need to be very disciplined about creating a good payment history while you are in the process of trying to repair your credit.