Is it better to have a secured credit card and never use it at all or to use about 20% of the credit limit?
Answers:
A secured credit card requires that you deposit money with the issuing bank, and the bank will issue a credit card in the same amount for your use. Secured cards are guaranteed to be approved, because the bank has your deposit money in case you do not pay your balance. A secured credit card for bad credit operates much like a regular credit card. You receive a monthly statement, and you pay your minimum monthly payment or the balance in full each month. You are charged an interest rate, annual fee and possibly other fees for a secured credit card account.
Be aware that with a secured credit card for bad credit, your charges are not deducted from the deposit you have with the issuing bank. The bank is simply holding your deposit in the case that you default on your credit card balance. You must pay your monthly payments, and owe the bank the balance that you have charged on the credit card. You cannot refuse to pay simply because the bank is holding a deposit without further damaging your credit. Read more from: http://www.credit-card-gallery.com/secur...
I've had to walk this path already and rebuilding your credit takes a bit of effort.
First, pay every single bill (including utility bills) you have on time every single month. Believe it or not, that gets mentioned on your credit report.
Next, if you get a credit card, make reasonable purchases and pay off the balance every single month. Don't carry a balance over. Don't get it then cut it up, because that doesn't prove you can handle the credit and pay the balance when due. Make a small purchase (say under $50) and when the monthly bill comes, pay it in full.
Keep doing this for the next year or so and you will rebuild your credit.
Use it for small purchases and pay it in FULL every single month and never ever ever carry a balance.
If you're going to get a credit card, a secured one at that, it would be to your benefit to use it at around 20, no more than 30% of the limit. Establishing credit means just that, using it. You can't expect to build credit by not using it. Paying it off in full is a good idea, but the scoring system is set up to determine how well you can carry a balance. A good way to use your secured card, since it would be linked to a savings account, is to boost the credit line by adding to the deposit. It will help your score if you have a card with a high limit, as that helps your utilization ratio (debt vs. available credit), which counts as 30% of your score. Keep in mind that you'll get the deposit back usually after a year, if you pay on time, and keep the balance manageable.
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