How to use a secured credit card to rebuild credit

People in Tennessee who have struggled with high levels of credit card debt might end up having their cards cancelled, especially if they file for bankruptcy relief. The ability to become free from the debt associated with credit cards can be immensely helpful but then it is time to turn one’s attention to rebuilding credit in a positive and manageable way. A secured credit card may well offer a good first step in doing just this.

As explained by USA Today, a secured credit card differs from typical credit cards in that it requires the consumer to essentially front money that acts as collateral against the credit limit assigned. For example, to get a secured credit card with a $300 credit limit, a person would pay $300 in advance to the bank. This money is then held and may be refunded if the card is later cancelled.

The credit limits of these cards are generally lower than with some unsecured cards but secured credit cards are also typically easier to get qualified for in part because of their lower credit limits. The fact that they are secured by cash also helps facilitate approvals.

Money Crashes indicates that by using a secured credit card prudently, a consumer can improve their credit score to the point where they can then qualify for an unsecured card. The best way to do this is to use the secured card for small purchases every month and then pay the balance in full each month. Paying the balance in full may also help avoid high interest rate charges.

 

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