Building credit can be difficult. In order to be approved for a credit card, you need to have a good credit score. An easy way to build your credit score is with a credit card, so this can make it a difficult cycle of needing to be approved in order to build your credit.
If you struggle with bad credit or are new to credit, it can be difficult to be approved from a majority of credit lenders. Considering a secured credit card can help you boost your credit score and help you get approved for the line(s) of credit you want.
Secured Credit Card Definition
A secured credit card is defined as a credit card that requires a cash deposit upfront to open the card. This deposit will usually dictate what your credit limit will be, for example is you deposit $300 than your credit limit on the secured credit card will be $300.
This deposit makes it so the lender will be at less of a risk if you default. If you do not make your payments on time, the lender will have the money from your deposit as collateral to cover the costs. This makes secured credit card companies able to approve those with lower credit scores since they have provided collateral.
After a consistent repayment history on your secured credit card, you may recieve your deposit back. You can use this secured card to help build your credit score to be eligible to apply for an unsecured credit card in the future.
Secured credit card vs. unsecured credit card
A secured credit card functions the same as an unsecured credit card. You will have monthly statements, a credit limit, interest, and everything that is also included in an unsecured credit card, otherwise known as a common credit card.
Unlike a secured credit card, an unsecured credit card does not have the original deposit as collateral. The credit limit will instead be set by the lenders assessment of risk based off your credit score, credit reports, payment records, and more.
A secured credit card is intended for consumers looking to improve their credit with little credit history or bad credit. After responsible use of a secured credit card, your credit scores will increase, thus increasing your odds of approval for other lines of credit.
If you have less than perfect credit and don’t know where to go, CrediReady can help. Our trusted network of credit repair experts can boost your score and help you qualify for the credit you need. Take a moment to fill out our free no-obligation credit repair inquiry form and start fixing your credit today!