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How To Establish Credit Through A Secured Credit Card

Most people look down on this and consider it to be a last resort as I mentioned in an earlier article.  This may be because normally, there is no local flavor associated with the deal and the interest rates can be exorbitant.  You will just be another in a loan portfolio of 25 million accounts so you are just a number to them.

However, I like this approach because it is a very quick, easy way to establish credit.  And that is your objective.  Make your payments on-time in the amount expected or more for 6-months to a year and you should be well on your way to having a great FICO credit score.

The downside on this approach is that you will need to put money on account and the interest rate may be mind-boggling.  And, there may or may not be an application fee of $40 or $50 USD.  Plus, there may be some nasty penalties that will be charged against your account (and hence your security deposit) if you violate their rules.  Also, at least at first, your credit limit will be tied to the amount of money you have deposited in the account.

However, many of the secured credit cards will back off on the interest rate a bit and give you credit above your initial deposit after you demonstrate that you are a trustworthy credit risk.  They may even let you actually spend the money that you put down as a security deposit after a certain amount of time has passed with no problems on your account.  But, these kinds of things vary based upon the offer.