Sometimes the most frustrating part about having poor or no credit history is that lenders want proof that you’ve already paid your bills to other lenders faithfully. How can you do that if you’re STRUGGLING to be approved in the first place?
Chin up! There’s another way.
A “secured” credit card is a card with a modest limit backed by a cash deposit you pay to a financial institution.
Because the lender already has some or all of the credit limit on reserve from your initial deposit, you’re considered less of a risk to supply credit to.
Proper use of the card, like making transactions and paying off the balance in full each month, can help establish an ideal track record that financing centers want to see when they pull your credit file.
But be careful, there are some downsides.
Your initial deposit – typically a few hundred dollars – might be hard to collect if you’re already in financial distress. Some secured cards also carry application, processing, and annual fees the way regular credit cards do.
The key to using this method? Only charge affordable items you already have the cash to purchase. This way you can build a track record of repayment trustworthiness for future borrowing!