credit cards

Use secured credit cards to improve credit

If you need to build a credit history, or rebuild one that's less than stellar, secured credit cards might be the way to go.

It can be a challenge to obtain a loan if you don't have a credit history or if a setback has damaged your credit score. Secured credit cards can be a way out of that trap.

Unlike unsecured credit cards, secured cards are backed by a deposit the customer has made into a savings account. That money serves as collateral and remains untouched -- unless the cardholder fails to pay.

Bankrate.com can help you find secured credit cards and learn more about their features.

Some cards help you build credit history by automatically reporting your use of credit to the three major credit bureaus -- TransUnion, Experian and Equifax -- which can be a big benefit down the road. With other cards, the line of credit is tied to the amount of the security deposit you put down, so a larger deposit gets you access to more credit. But some issuers offer credit cards for more than the amount that you have on deposit.

There's also the possibility that the card issuer might eventually convert your account over to an unsecured card with a higher credit limit.

Before you apply for such a card, make sure to check the annual fees and interest rates associated with the account.

Like any other credit card, it's crucial to use secured credit cards responsibly, stay below your limit and pay your bill in a timely fashion. Doing so can help you build that sorely needed credit history so you can then obtain an unsecured card.

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