Most people understand how credit cards can help them to build credit. However, very few people are familiar with secured credit cards. There aren’t generally television commercials about them and people don’t talk about them a lot. These cards can be an extremely useful credit building tool, if you understand how to use them.

The first thing that you need to understand about secured cards is that they report to credit bureaus just like any other card, at least most of them do. Before taking out a secured credit card, you will want to make sure that they report to all three bureaus. As long as they do, you will see an on-time payment each month on your credit report, and that will help you to raise your credit score.

Before people take out a secured card, they need to understand a few simple concepts, to ensure that they don’t do damage to their credit. First, they need to make sure to NEVER miss a payment, to NEVER pay late. Late payments will do a lot of harm. Secondly, you really need to watch your account balance if you’re going to use a secured card. You never want to use more than 30% of your available credit and with secured cards, you don’t have a lot of available credit.

If you have a $200 limit on a secured card, you only have $60 to spend. Anything above that will hurt your credit score. Fortunately this deficit is temporary and will go away when you pay the card down.

As long as you make your payments on time, and stay below 30% of your available credit, these cards will do wonders for your credit score. On top of that, they are a stepping stone that will help you to get unsecured cards with high limits. After I first took out a secured card, it took about six months before I was able to get approved for an unsecured one. For me, taking the card out was one of the better financial decisions I have made.

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