Credit score is an important factor when you try to open a credit card or take a loan. One of the popular ways to establish credit score is to open a secured credit cards.
It is a type of credit card that help people with bad or low credit score. It allows customers to improve their credit worthiness in eyes of credit bureaus like TransUnion, Equifax, and Experian. Having security deposit protects bank in case borrower cannot repay card’s balance.
If you have low credit score it can be a challenge to open your first credit card. Secured credit card requires you to make a security deposit that is equal to how much you can spend. Bank opens a savings account for you where your security deposit can sit for a long time and guarantee to the bank that they are not going to loose money if you are not able to payoff the balance.
Some cards offer so called “graduation”. It means your credit score improved enough so that bank can trust you. Then bank return security deposit back. Not all banks do this, so make sure to check it before hand.
Here are few examples of secured cards.
Tracking your credit score is important in long term. It can affect whether you can get a credit card, personal loan, auto loan, and mortgage. Without it your APR may be very high and cost you arm and leg in additional interest. You can request your credit report once a year from credit bureaus, but it is better to check it using free tools like CreditWise from Capital One or Credit Journey from Chase. They both provide useful information. If you see some credit inquiry or unknown credit account in your report, you should dispute it.