The Secret To Getting A Credit Card With No Or Limited Credit
Having a credit card is practically a necessity in this day and age. Without one, you can’t rent a car, reserve a hotel room, or collect reward points that you can trade in for a plane ticket or even a deposit straight to your bank account.
But if you’ve never had a credit card, you might find that getting one isn’t so easy. That’s because credit issuers like to see that potential cardmembers have a history of paying back their debts reliably. Building credit, and establishing a good credit score, can take some time. And if you don’t have credit, have a limited credit history, or have bad credit, you may get turned down for that great new travel rewards or cashback credit card you’d really like to have.
If you find yourself in this position, you need to know about secured credit cards. Secured credit cards are increasingly popular among folks who want to get a credit card but can’t get approved for a traditional, unsecured card.
How secured credit cards work
A secured credit card is used just like a regular credit card: you can use it to pay for purchases at any retailer that accepts Visa, Mastercard, or whatever network issues your card. The difference is that when you apply for a secured card, you’ll put down a deposit which acts as collateral. This could be anywhere from $200 to $2,000, and that amount will then become your credit limit. This way, if you default on paying back your balance, the credit card issuing bank is protected.
The payments you make on your secured card will be reported to at least one of the three major credit bureaus: Experian, Equifax, and TransUnion. Once you’ve had your secured credit card for a while and established a history of paying your balance on time and in full, you may be eligible for a regular, unsecured card.
Keeping your credit in good shape
Once you’ve established your credit, you’ll want to make sure to make all payments on time and keep your balances low. This is the best way to keep your credit score healthy, so you’ll be able to qualify for low interest rates on mortgages and other types of loans, as well as get approved for all the great rewards credit cards you want.
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