When someone applies for a loan or a credit card, a bank will take a look at their credit history and credit score to determine if they think that person is creditworthy. A credit score is a number that lets banks know just how creditworthy someone is considered to be. Banks think that the higher someone’s credit score is, the more likely they are to make their loan payments.
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Keeping a high credit score is very important and if someone does damage their score, it can be very hard to get it back to a good place. You can find excellent advice on how to further improve your credit score by going to websites such as Suze Orman’s and SmartMoney.
What can I do if I have a poor credit history?
Everyone has financial problems from time to time. If these short-term financial issues cause someone to miss credit card payments or default on a credit card, they can have a long term affect on that person’s financial life.
One way someone can help improve their credit score is by getting a secured credit card. This card works almost like a combination of a prepaid credit card and a normal credit card. The cardholder has to put a certain amount of money down in a deposit to act as collateral on the account. This deposit protects the credit card provider if the cardholder stops making payments and prevents the cardholder from adding a defaulted credit card to their history.
The deposit determines the cardholder’s credit limit. The cardholder then uses the credit card and makes monthly payments on their balance like a normal credit card. This activity is then reported by the credit card provider to Experian, TransUnion, and Equifax, the three top credit bureaus. Since these three organizations determine a person’s credit score using the secured credit card responsibly will have a positive effect on the cardholder’s score.
If the provider determines that the cardholder has used the secured card responsibly and their credit score is now high enough, they will upgrade them to an unsecured card and their deposit will be refunded. Since most providers keep the cardholder’s deposit in some type of savings account they might actually get more than their initial deposit refunded to them. Instead of upgrading to an unsecured card, the provider might just decide to reward the cardholder by raising their credit card limit without requiring an additional deposit.
What is an example of a good secured credit card?
One of the more popular secured credit cards from one of the most recognizable and trusted credit card providers is the Capital One Secured Master Card. This card requires a minimum deposit of $200. Once the cardholder is approved for the card, they can pay the deposit all at once or if that is too much for the cardholder’s budget, they can make payments instead. Once the minimum deposit amount is reached, Capital One will then send them their new credit card. The cardholder has 80 days to pay their deposit.
What are the terms for the Capital One Secured Master Card?
Most secured credit cards have a fairly high interest rate. This card has an annual percentage rate of 22.9% for balance transfers and purchases. The interest rate for cash advances is 24.9%. The interest rate for cash advances is usually higher than balance transfers and purchases no matter what type of credit card it is.
There is a $29 annual fee for this card. Secured credit cards are one of the few types of credit cards that still charge an annual fee. There is no fee for balance transfers or foreign transactions, but there is a 3% cash advance fee with a minimum fee amount of $10. When it comes to penalty fees there is no fee for going over the credit limit, but the cardholder should expect to pay $19 for payments made late and $35 for any returned payments.
The cardholder must be at least 18. The deposit in this card will not be eligible to earn interest. People with this credit card will be eligible to enroll in the Credit Inform program offered by Capital One. This program helps the cardholder monitor their credit and teach them ways to improve it.
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