There isn’t any reason to feel embarrassed by bad credit. When the economy hit rock bottom many people lost their income and got behind in their bills. Millions of people suffer from credit issues, you’re not alone. There are easy ways to rebuild credit even after financial disaster. Rebuilding credit is simply a matter of time and effort. The first step to take is finding out the steps to take and the second step is following them, and you’ve already begun by reading this post.

Did you know the federal government recommends secured credit cards for rebuilding credit? In order to understand why it’s recommended, it’s important to know what a secured credit card is.

There are different brands of secured credit cards, for example there are secured Visa credit cards, which means ,they’re accepted anywhere you see the Visa logo. There is also the secured MasterCard, if one is interested in those instead of Visa. Either Visa or MasterCard secured cards work the same way. First apply for secured credit cards through applications available online or at local banks, next the bank that finances the will either approve, or decline, the application. If you’re approved, the bank will require a deposit of anywhere from $200-$500. The credit card is then backed by that deposit, which sometimes even earns interest in a savings account until the card is closed. The secured card limit is either for the full amount of the deposit, or a certain percentage of the deposit.

How Does Using Secured Cards Help Improve Credit?

Many people fall behind in bills because of the loss of a job, medical bills, injury or hundreds of other reasons that can’t be avoided. People often get behind in one payment and then when fees accumulate, it begins the snowball effect. Once a late payment, or several late payments, occur they are put onto your credit report and lower your score. Once your score is lowered, getting a loan at normal interest rates is nearly impossible. In order to raise the credit score, you need to show you can make payments on time, but how can you do that if you get denied loans? The secured credit card is the answer.

Once you’re approved and have the card, make the payments for 12 consecutive month, on time, or even a little early. Don’t be afraid to pay the card off monthly as you use it. Once your credit score is raised, it’s wise to immediately close the card. Many unprincipled lenders charge ridiculous fees and hidden costs in their secured cards, it’s good to know which are the best secured credit cards.

Finding Good Secured Credit Cards

The best secured cards don’t charge ridiculous fees that, sometimes, can be the entire amount of the card limit! That means the fees all add up to the $300 you secured the card with. You’ll have to pay those fees off before you can even use the card again! Some secured cards charge a fee monthly for things like insurance to cover payments if you lose your job and can’t make them. The fees can be $25 and up per month. In other words, you’ll be paying a monthly fee, along with the interest, on the card. Reputable lenders will keep fees and interest to a minimum and will clearly state the fees on the application form.

Besides fees and interest, other things to look out for on good secured credit cards are making sure they report to as many credit agencies as possible, and finding out if your security deposit earns interest while it’s held.

Using secured credit cards to improve credit are just part of the rebuilding process. Another thing to do is to contact a credit counselor. They will often work out a payment opportunity to consolidate debt and dispute inaccurate entries on the credit report. Be sure to find out as much as possible before you apply for secured credit cards.

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