Debt Consolidation - Loans
& Credit Card Bill - Debt Consolidation
Credit Problems? We Can Help!
Secured Vs. Unsecured Credit Cards
When you get a credit card offer in the mail announcing that you are pre-approved for a new credit card, you are looking at an application for an unsecured credit card. If your credit is okay, then you are likely to be approved in the final stage, and you are sent your brand new card to either bolster your credit or charge up a storm (not recommended).
If, however, your credit is not good for whatever reason, these offers, if they come, are likely to be rescinded when the credit card company gets a whiff of your credit score. This makes it very hard for people with a bad credit history (or no credit history) to rebuild their credit from the ground up.
A credit score is increased in various ways, one of which is regular and timely payments to obligations such as a mortgage or auto loan. Another is the number of credit cards in the form of available balance, with a total balance on the cards of less than fifty percent (and preferably lower) of your total available credit. If you are unable to get a mortgage, car loan, or credit card, however, your credit will remain at a stagnant low.
The way out for those with imperfect credit is to sign up for a secured credit card through a bank or another organization willing to extend a secured credit card offer. These credit cards are different from unsecured cards in that there is not a major risk for the lending institution. The person applying for the card must first make a deposit into an account specifically for the credit card. The credit limit of the card is directly related to the balance in the account, and may be anywhere from 50% to 100% of the total balance of the account.
Secured credit cards are a great alternative for someone who needs desperately to rebuild their credit, however you should never charge more than you can pay, as the interest rates are often higher than on traditional credit cards, and the limit will likely be lower since it is determined by the amount of cash that you can keep in your account. On the plus side, the bank will pay interest on the cash that you are forced to keep in the account for the secured credit card.
Once you have set you your secured credit card account, be sure to check your credit report annually to see how your credit is progressing. If you can afford it, consider getting a car loan from a high risk lender. You can expect to pay ridiculous interest on any loan that you take out at first, but this is an unfortunate consequence of low credit. You can also have someone that you trust cosign the loan, but be sure that you are able to make payments or your friend will be stuck and likely not your friend anymore.
Check occasionally to see whether you can get accepted for an unsecured credit card, and remember the rules of careful spending to keep from going out of control with it. An unsecured card will further help your credit score, and will likely be at a lower interest rate than your secured card, meaning that your payments will be less on the same balance.
Secured cards certainly have their place in society, but unless you have no credit or poor credit, they may not be the best option for you. Talk to your bank about what they can do for you, and be careful – it is easy to overspend on your
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Allied Debt Consolidation
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Debt Consolidation - Loans & Credit Card Bill - Debt Consolidation
Last
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Monday, March 24, 2008
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