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Report to the credit bureaus:
Be sure to check that a secured-card issuer reports to the three
major credit bureaus before applying for any card. The reason for
having a secured card is to build a good credit history. If the
issuer doesn't report, you've lost a major benefit. Some of the
smaller issuers may not, which is why it's a good idea to get a
secured card from a major, reputable bank.
Ask if the issuer will flag the report to the credit
bureaus as a secured card. Consumer Action, a non-profit advocacy
and education organization based in San Francisco, points out that
such a flag could be a deterrent to rebuilding credit.
If you start getting mailers offering you unsecured
cards after you've made several months of on-time payments, you'll
know that the bank is reporting.
Length of deposit: Also,
ask how long the money has to stay on deposit after the account
is closed. Some banks will want to keep the deposit for a couple
of billing cycles to cover any stray charges that arrive.
Not everyone qualifies for secured cards
Getting a secured card is not as easy as it sounds, however.
Card companies have different requirements for applicants. All banks
accept those with no credit history or no information on file with
a major credit bureau.
Some banks will accept people who have had a bankruptcy
as recently as six months to one year before they apply. However,
most require that a court has discharged the bankruptcy. And still
others will not consider people with a past bankruptcy.
Build your credit rating
Remember, you're using a secured card to build up a strong
payment history, not to go into debt. So stick to smaller purchases
that you can pay off each month. And always pay on time. This will
build a strong credit rating. Once you've done that, move on.
If you have enough discipline to use a secured card
responsibly, you have enough to use an unsecured card and set up
a better savings program on your own.
Taking off the credit training wheels
After a year of on-time payments with a secured card, you may
qualify for an unsecured credit card with a lower interest rate. Shop
carefully.
You've worked way too hard to establish a good payment
record. Don't sell yourself short by signing on for the first costly
offer that comes your way. Be a smart shopper.
This credit
card search engine from Bankrate.com will help you compare offers
from issuers around the country.
Don't overlook offers from local banks and credit
unions; the deal you're looking for may be from a lender just around
the corner.
And you won't need a lot of cards to build credit.
One or two low-limit cards are more than enough.
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