credit cards

Using a credit card to establish good credit

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 nonprofit 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 credit 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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Product Rate Change Last week
Balance Transfer Cards 15.73% --0.00 15.73%
Cash Back Cards 16.43% --0.00 16.43%
Low Interest Cards 10.98% --0.00 10.98%
 
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