Repair a Bad Credit by Using a Secured Credit
There are situations where a he may find it difficult to erase his credit mistakes from a companyís record, which consequently makes new creditors and lenders shiver with disapproval. Finding ways to repair a bad credit is a scenario that no credit holder wishes to be in.
Then do the next best thing: Get a secured credit card.
Secured Credit Card: What is it?
A secured credit card operates just like a regular credit card. The major difference is that the cardholder is mandated to give a deposit against the credit limit on his account. This acts as a safety net for the creditor, should something happen to the credit holder that will force him to make a default on all his credit card payments.
Usually, the credit limit on a secured credit card is around 50% to 100% of the deposit a credit holder makes. So if he deposits around $800 for a secured credit card, then his limit will be between $400 to $800.
If you read the Common Credit Card Fees, you will see that secured credit cards have fees, unlike a regular credit card. The usual fees include the processing fee, annual fee, and the application fee. However, caution must be taken, because some cards with high fees can reduce a credit holderís deposits significantly. Consequently, this can decrease a personís credit limit.
The Advantages of Having a Secured Credit Card
The most common reasons why damaged credits exist is inadequate or poor payment habits. In case the traditional way of getting credit is improbable, then applying for a secured credit can be an effective way of showing a newly-improved payment habit. The reality is, a credit holder canít really prove that he has the capacity to make his early payments until he acquires a new credit card for himself.
Should a credit holder decide to apply for a secured credit card, it is advisable that he informs all the three major credit bureaus so he can be sure that his credit history is reestablished. In the United States, they are: Federal Fair Credit Reporting Act (FCRA), Fair and Accurate Credit Transactions Act (FACTA), Fair Credit Billing Act (FCBA), and Regulation B. There is a good reason why he has to report to these three agencies Ė they do not share information amongst themselves. A credit holderís record might be updated in one credit bureau, while itís not with the other two. So, if he wants to be safe, it would be best to include all of them in his reports.
When a credit holderís application is approved, he should remember that his purpose for the card is to demonstrate a positive credit history. So itís best to be careful and only use the credit card to purchase small items that can be easily paid every month. Remember: Temptations should be controlled with caution. It is best to remember a credit holderís ordeal when he tried to repair a bad credit, and that chance can only happen once and never again.
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