Secured Credit Card
What You Need to Know About Secured Credit Cards
Consumers with bad credit or no credit sometimes can’t get approved for a credit card. VerdeLoans, providers of financial products and services to those not served by traditional financial institutions, wants to share what you need to know about secured credit cards. They can be invaluable tools to positively affect your credit score, or to build a viable credit history from scratch. Going through life without a credit card or any viable source of credit can make things far more challenging than necessary. Certain transactions may require credit cards, such as booking hotel rooms or rental cards. In addition, a credit card is the central pillar of building good credit. It’s possible to do so without ever having a credit card, but it will take much more work.
While credit cards are incredibly useful, it is possible to go through life using other payment methods such as debit cards or cash.
What Is a Secured Credit Card?
A secured credit card is unlike other types of credit card because it requires you to provide a cash security deposit up front. The value of this deposit is typically equivalent to the value of the credit line. The entity that provides the card – the issuer – holds the deposit in case the cardholder doesn’t pay their bill. If the account closes in good standing, or if the card is upgraded to a regular ‘unsecured’ card, the issuer returns the cardholder’s initial deposit. The deposit protects the issuer from losing money, which means that secured cards are easier for people with no credit score or poor credit to qualify for.
A secured credit card can help you build or rebuild your credit, just like a “normal credit card.” The one thing a secured credit card generally won’t give you is the ability to actually borrow money. Most secured credit cards are fully secured, which means your spending limit will equal your deposit amount.
How to Build Your Credit with a Secured Credit Card
When you are facing a difficult financial situation, good credit makes life easier. Things like mortgages and auto loans are easier to be approved for with a good credit score, and better interest rates and terms become available. Secured credit cards can be helpful to those who are either building or rebuilding their credit, since the barriers to entry are much lower than for other financial products. It can take as little as a month to start seeing benefits to your credit score from a secured credit card, but building a high credit score will take months, even years. The companies which compile the credit reports on which credit scores are based are called credit bureaus. While a cardholder uses their secured credit card, the issuer reports on the activity, informing these credit bureaus. A cardholder that pays their bill every month and keeps their balance low can strengthen their credit, gradually building a good credit score.
What's Influencing Your Credit Scores?
on-time payments, late payments, missed payments: all factor into your score, for good or ill.
the length of time you’ve been using your credit accounts.
not just credit card debt, but also loans, collections, and other credit accounts.
recent applications for new credit can be a negative factor to your score.
which types of credit accounts you're using.
civil judgments, bankruptcies, and other such events can influence your credit.
Alternatives to Secured Credit Cards
Secured credit cards are one way of demonstrating financial responsibility and having access to money without carrying cash, but there are alternatives that can help you build credit. Opening a bank account with a debit card does not get you a line of credit, but somewhat negates the need to carry cash. A credit builder loan is a loan specifically intended to indicate financial responsibility via a reliable payment history over a period of months or years, by making regular monthly payments. Credit bureaus like it when you pay your bills on time, particularly loans and lines of credit.
VerdeLoans Credit Card Securing
VerdeLoans offers an alternative to the standard secured credit card. Instead of a cash security deposit, VerdeLoans can accept a valuable item such as a piece of jewelry. We will then issue a card with a credit limit equal to the value of the item. This card can be used as an ongoing financial product to cover purchases that may come up outside of your pay cycle, such as bills, one-off payments, fees, fines etc.
If you are interested in this service, sign up for our mailing list in order to be notified when you can first apply for a VerdeLoans secured credit card.