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A Guide to Rebuilding Bad Credit with Secured Credit Cards

March 13th, 2019 · Credit Cards, Credit Rebuild, Credit Repair, Prepaid Cards

Having a good credit score is not only crucial for making large purchases for things such as homes, vehicles, and high-end appliances, but it’s also necessary to obtain low-interest loans, employment at specific companies, and some residential renting approvals. Essentially, secured credit cards offer a way for individuals with unestablished or poor credit scores to use deposited cash as collateral for credit card purchases. 

Does this mean that secured credit cards don’t come with certain caveats? Of course not, but if you’re someone who’s run into a low credit score setback, they may be an excellent way for you to get on the road to rebuilding it.

Here are a few of the pros and cons of secured credit cards.


  • They offer the opportunity to slowly rebuild your credit score by making timely monthly payments (emphasis on the word “timely”).
  • Your credit score will show more credit lines and increase your borrower credit-worthiness in the eyes of lenders.
  • Secured credit cards give you the opportunity to set your credit limit, according to your comfort level.
  • You can qualify for one even if you have a low credit score and unpaid debts.


  • There are a few credit issuers who report secured cards as “secured” instead of just listing them as credit lines. Make sure to ask about reporting before applying.
  •  Secured credit cards will usually have higher interest rates.
  • Unlike unsecured credit cards, secured credit cards require a deposit.
  • The amount of your deposit determines the amount of your credit line.
  • Some secured credit cards can come with exorbitant fees, which can whittle away the amount you have available to spend.

The bottom line:  how getting a secured credit card helps your credit.  

Not convinced yet?  Here’s the nitty gritty on how getting a secured card will help you.  Your credit score is based on 5 things:

  1. Your payment history (35%)
  2. Your total use of your credit limits. (30%)
  3. The length of your credit history (15%)
  4. The amount of new credit you have (10%)
  5. The “mix” of your credit.  (10%)

We’ll go over how each of these factors can be helped with a secured credit card.  

Payment history. Once you receive a new secured credit card, as we’ve mentioned several times in this article, it is important to make your payments on time.  As you can see, your payment history is the most important part of your credit score.

Credit utilization.  We mentioned that you should keep your balances at 25% of your total limit.  With secured cards, your credit limit is going to be quite low compared to unsecured cards, especially if you can’t afford to make large deposits to open an account.  Many people have $500 limits to start with. (Just so you know, 25% of $500 is $125.) Some experts say that 10% is the limit you really need to stay under, but you should be ok around 25%.  Really, you are using the secured cards to rebuild your credit and they should be looked at as a tool rather than the way an unsecured card is to be used (as a convenience for shopping). You shouldn’t be charging a lot on your secured cards.  

Length of credit history. The total length of your credit history will not change when you get a secured card, unless you have no credit history at all.  However, the older an account is on your credit report, the better your score (if your payment history and credit utilization are good).  Having “seasoned” good credit lines on your credit report will indicate to future lenders that you are now a responsible consumer. There is no time like the present to begin building your credit report.  

New credit. The ability to apply for and receive new credit is an indication of your credit worthiness.  Getting new credit lines looks good to lenders and is reflected positively on your credit score.  

Mix of credit.  Lenders like to see that you have both installment (auto loans and mortgages) and revolving (credit cards, equity lines of credit) on your credit report.  If you only have installment loans on your credit report, applying for a revolving line of credit (a secured card) will help improve your score. If you have no installment loans (you don’t have a mortgage or auto loan), getting a secured card will help you obtain an auto loan or mortgage in the future.   

Helpful Guidelines When Using Secured Cards

Secured credit cards provide a practical way to build purchasing habits that can keep you reined in from impulse or frivolous spending. Ensuring that you use your card wisely is of the utmost importance. Here are some ways to do this.

  • Make EVERY payment on time.  That may seem like a no-brainer, but it’s important to emphasize. After all, this is the foundation of building good credit: paying back what you owe. If you can make payments before your due dates, even better. Payments that are 30 days or more past the due date can get listed on your credit report, which means another setback to the improvement of your score.
  • Keep your balance at a reasonable level. Try not to make massive purchases on a secured card and aim to keep the balance no more than 25 percent of your limit. You’ll want to want to minimize the amount of debt shown on your credit report while you work to rebuild your credit.
  • Use one secured card a time. Establishing several secured credit cards can be a big red flag to issuers. Remember that the more you apply for credit, of any form, the more hits on your credit score, which can have a negative impact. Work on making steady payments on your credit card anywhere from six to eight months before applying for new credit lines. 
  • Ask about reporting. Find a card that reports to all three of the major credit bureaus, so that your credit history will be consistent for each bureau.
  • Set up a monthly autopay. Many issuers offer an autopay option to make payments easier for cardholders. If your card doesn’t provide this, consider setting it up through your banking institution. Auto-payments help you to avoid late payments and may even make you eligible for specific discounts.
  • Go with established card issuers. Apply for secured credit cards with well-known, reputable credit institutions and be leery of unestablished card issuers.

Breaking Down Secured Credit Card Fees

It’s important to understand the fees associated with your card before accepting the terms. If you’re looking to rebuild your credit, the last thing that you need is a new credit card with month-to-month fees that you can’t afford to pay.

  • Application Fees — Some issuers charge an initial fee to apply for a secured credit card, which can be upwards of $50. While most do not, you should always read the application terms before signing up.
  • Annual Fees — Annual fees are deducted from your deposit every year, though the best-secured cards will come with no or low annual fees.
  • Interest Rates — Also referred to as APRs, these fees get deducted from your deposit on a yearly basis, and the percentage amount will vary with each card issuer. While secured cards typically have higher APRs, it’s always best to shop for the best deals.  APR stands for annual percentage rate and is a calculation that is based on the total cost of owning the card.
  • Transaction Fees — Some secured cards come with a small fee attached to every purchase you make, and this small fee can quickly add up to a significant cost at the end of your billing cycle. Remember that the small purchases count, too.

How to Find the Right Secured Credit Card for You

Spend some time checking out the numerous card options that may be available to you, because it’s worth it. Here are a few takeaways that you’ll want to use when making your decision. 

Is the company reputable?

Be wary of unknown or new card-issuing companies. Unfortunately, the financial industry is fraught with scammers and sub-par lenders who thrive on taking advantage of unsuspecting borrowers. Check online reviews, the company’s history (and time in business), Better Business Bureau feedback, and any other sources where you can gather information about their lending practices.  

What deposit is required?

Similar to vehicle purchases, the amount of your deposit will go towards your card balance, but remember that your deposit will determine your limit. It can be as low as $200 or as high as $9,000. 

What interest rates (APR) and fees come with it?

Have a clear understanding of all fees associated with opening and maintaining your account. Saying it’s important to “read the fine print” when it comes to applying for credit cards, secured or not, is an understatement. Trying making a list of at least 10 top card picks and compare their rates to see which offers the best benefits for you.

How do they report your credit? Is it to all three Major Bureaus?

Inquire about your potential cardholder’s reporting details. Remember, it’s essential to choose an issuer that not only reports to all three credit bureaus (Experian, Trans Union, and Equifax), but also reports secured cards simply as “credit” and not “secured credit.” 

Applying for a Secured Credit Card

You can apply for a secured credit card online or at your banking institution or credit union. When you do, you should be ready to supply the following documentation:

  • Name, contact details, and social security number (must be 18 years or older, of course)
  • All income documentation and verifiable employment details
  • Bank or credit union details including history, balance, date opened, and additional account holders

Secured credit cards can be the answer to rebuilding your credit if used in the right way. Make sure to keep a close eye on your credit reports from all three bureaus to ensure consistency and inaccuracy as you work to build your credit scores. And while rebuilding your credit isn’t an overnight process, it’s one that is worth the effort.

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16 Simple Ways to Keep Your Financial Resolutions in the Coming Year

January 10th, 2019 · Budgeting, Credit Rebuild, Credit Repair, Debt Consolidation, Debt Management, Financial Literacy, Saving, Your Money

With the start of a new year comes a rash of resolutions. These promises to do better in the coming year are an annual rite of passage, but making those promises is far easier than keeping them.

Everyone who has resolved to lose weight and get more exercise can sympathize with this situation, but promises to save money can be just as hard to keep. If you have vowed to make this the year you finally get a handle on your finances, you need more than a promise – you need a plan.

If you plan ahead and make the right choices, you can get ahead financially in the coming year. Here are some simple and relatively painless ways to keep those financial resolutions once and for all.

Banish the bank fees. If you are still paying to keep your money in a bank, now is the time to banish those fees. If you look around, you can find a bank that values your business – and does not charge you for it.

Get a grip on your cash flow If you want to improve your personal finances this year, start planning your cash flow in advance. When you learn to develop a budget and stick to it, you get a better idea of how much cash you will have on him each month. Understand what your cash flow will be for the next six months and adjust your spending accordingly. When you reduce your reliance on credit cards and start focusing on how much cash you have on hand each month, you realize how easy it is to reduce your debt load simply by making smart purchasing decisions.

Ramp up your interest. Once you have banished the bank fees, look for ways to make your money work harder for you. Interest rates are on the rise, so take advantage of that free money.

Adjust your withholding. If you get a big tax refund every year, why not put that money to work now? Once you have found a great interest rate on your bank account, adjust your withholding rates for a fatter paycheck – and even more free money.

Pay attention to your debt-to-income ratio. Start paying attention to your debt-to-income ratio if you want to improve your financial situation this year. Understanding your debt-to-income ratio is crucial if you want to improve your liquidity and build your net-worth. Monitor what percentage of your income goes toward paying down debt and make it your mission to decrease that percentage by the end of the year.

Turn your clutter into cash. All that extra stuff gathering dust in the closet could be a source of ready cash. Make this the year you stop collecting, and start selling off your unwanted stuff.

Increase your retirement plan contributions. If you have a 401(k) plan at work, ramp up your contributions and save even more. You can reduce your tax bill and prepare for your future, all at the same time.

Abandon your unused subscriptions. From magazines you never read to services you no longer use, the cost of unused subscriptions can really put a damper on your finances. Review those subscription charges and put the money back in your pocket.

Pay more than your monthly minimum payment. Consider making larger payments on your debts to reduce the time you spend paying off your credit cards and or loans. Paying your monthly minimum payment is not an efficient way to reduce your debt. Even paying an extra $50-$100 per month on your loans or credit card balances can significantly improve your financial situation after just one year.

Set financial goals. If you want to improve your personal finances this year, start setting annual financial goals for yourself. It is not enough to want to be better off financially; you must be willing to put in the hard work. Set long-term goals like saving enough money for a vacation, purchasing a new car, or saving up for a down payment on a home. Be specific with your goal setting and track your progress on a weekly basis.

Pay down student loans. If you’re still going to school, it may make sense to begin paying on those loans right now.  Long gone are the days where student loans come at low interest rates. If you’re out of school and currently paying them down, make throwing a little extra cash to the balances of the loan a priority.  Read about more about student loans here.  

Open a new credit card. While it may seem counter-intuitive, getting a credit card can greatly help your credit:  part of your credit score is the ability to get new credit (the theory here is that your credit is good enough to get new credit).  If you don’t currently have a credit card, now may be a good time to get one – credit standards for new customers are much more relaxed then they were during the last recession.  In addition, there are many rewards cards programs that can save you money, especially if you pay your credit card balance in full each month. For more information on getting a credit card, see our credit card guide.   

If you are renting, request that your payments be reported.  While not all landlords have the capability to report to the credit bureaus, several of the credit reporting agencies do accept rent payment histories via several rent reporting services, some of which are free.  This can be especially important if you are planning to buy a home sometime in the future and you don’t have much credit history already built up.

Consider talking to a financial planner.   Even if you don’t have much money to invest right now, talking to a financial planner can help put your overall long-range money goals into perspective.  Part of what financial planners do is actually calculate the date at which you can retire, based on monthly/weekly/annual savings rates, which can be a great motivator to save.  Read more about financial planners.

Build an emergency fund. All that money you are saving?  It not only helps to pay down existing debt, but having emergency funds can help stave off the financial crisis of having surprise car repairs, medical expenses, or having that home appliance or plumbing break down.  If you don’t have the money to cover emergency expenses, you may find yourself getting into more debt, essentially forcing you to take a step back in your march to improved finances.

Improve your credit scores.  Higher credit scores mean lower loan costs, better access to cheap credit, lower insurance, overall, your financial status is better!  There are some simple things you can do to improve your credit: correct your credit report, pay down credit cards and ask for a credit line increase.  Creditinfocenter has a complete guide to credit repair.  


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Credit Freezes Are Now Free

October 10th, 2018 · Credit Repair, Credit Reports

Because of new law signed last May by President Trump, credit freezes are now free at all three credit bureaus. The freezes formerly cost $10 per bureau. Once a report is frozen, it must be thawed and credit “thaws” also used to cost $10 per bureau, making the cost of a credit freeze $60 for a single freeze/thaw cycle. The new law took effect September 21, 2018 and was part of the Dodd-Frank Act. Before the law took effect, Equifax and TransUnion had already quietly waived the fees, but because of the law, Experian must now also offer credit freezes/thaws for free.

What is a credit freeze?

A credit freeze essentially blocks a lender’s access to your credit report. If you are having issues with identity theft, a credit freeze will essentially block a lender from reviewing your credit report information. Without access to your credit report, a lender will not issue new credit, so no new accounts can be taken out in your name. Since different lenders use different credit bureaus, or all three, In order to effectively freeze your credit, you need to freeze your credit reports at each of the bureaus: Experian, Equifax and TransUnion.

A credit freeze will not block existing creditors from looking your credit report, nor prevent you from reviewing your own credit report at websites like is where consumers are allowed pull their credit report for free once per year.
See this article for more information on credit freezes.

Other Credit Report Protections
There are different types of security measures you can take with your credit reports, some of which are not free.

Credit Locks
You can also do a credit “lock.” A credit lock is essentially the same as a freeze, but is supposedly easier, as the lock or unlock process happens instantly. The other difference is that a credit lock costs money at Experian. Like a freeze, you must do the lock at all three bureaus for it to be effective.

Here’s where the gotcha comes in: service agreements for each bureau make it clear that the companies don’t guarantee error-free operation or uninterrupted service. The protections of a credit freeze are mandated by law and can offer better protection.

While all three locks can be done with the aid of an app, there are differences. Experian bundles its lock with another credit report service and charges $9.99/month. It also requires that you waive the ability to enter into a class action lawsuit and mandates arbitration. Equifax and TransUnion do not require you to waive your right to sue, though TransUnion requires you to opt into advertisement of various credit products.

Fraud Alerts
Another type of protection is a fraud alert, which requires credit bureaus to contact you to verify your identity when a company requests your credit file. This isn’t a fool proof system. Under the new law, initial fraud alerts must last for one year once established. Advantages: fraud alerts are free. One other advantage: with a freeze, you must initiate at freeze at each credit bureau, meaning you need to go through the process 3 times and maintain 3 separate PINs. With a fraud alert, placing the alert at one credit bureau automatically places the alert at all three bureaus.

To remove a fraud alert, Experian and Equifax requires that you notify them in writing and submit copies of proof of identity. TransUnion has an online system to remove the fraud alert.
You can have both a credit freeze and a fraud alert on your credit report simultaneously if you want to make your credit report as tamper-free as possible.

Credit Monitoring
With credit monitoring, the consumer is sent alerts when something on their credit reports change. All of the credit bureaus offer this service at a price, though there are some free ways to get credit monitoring. For instance, if you sign up to a website like Credit Karma or have a credit card from a major bank, you are often offered credit monitoring for free. Paying for credit monitoring is not really a good idea. It’s like finding out your home has been robbed and the thieves have already made off with all the loot — doesn’t really do you much good. It just allows you to know there is a problem and take steps to fix the damage, not prevent it in the first place.

Should I do a credit freeze?
Since there is absolutely no cost for doing so, some experts recommend doing the credit freeze permanently, only thawing when you know you are going to apply for new credit. The only things you will have to remember are your PIN (which you are required to create at the time of freezing your credit), and to give the process ample time to thaw your credit file. The process of thawing is supposed to take an hour, but really you should give it three business days so you are not left in the lurch when trying to obtain new credit. Also, since it’s impossible to predict which bureau the lender will use, you will need to initiate the thawing process at all three credit bureaus, then freeze them again when the process is complete.

Even with the well-known Equifax hack which happened in 2017, where millions of American consumers were affected. many consumers did nothing to protect themselves from this potentially serious personal security breach. According to the New York Times, the University of Michigan interviewed 24 people who knew about the breach and its serious nature and found that none of them had taken any steps to protect themselves. These consumers suffered from what the researches called “optimism bias,” which is to say that the consumers believed nothing could really happen to them. In other cases, people with poor credit assumed that because their credit was so terrible, no identity thief using their information would be offered credit. Such people often wake up to unwelcome surprises when reviewing their credit files.

The new law also required that credit bureaus allow parents to freeze their children’s (age 16 and younger) credit reports. Children are commonly the target of identity thieves as their Social Security numbers are untarnished — unused and have no credit data. A person under the age of 18 cannot legally enter a contract without a parent’s permission, so typically, children do not open credit accounts and often a child’s credit report is not reviewed with the frequency as an adult’s. This makes the situation ripe for taking the information and running with it. If the information is obtained early enough in a child’s life, the identity thief could potentially operate for 10 years without being detected.

Where to place a freeze:
TransUnion: Visit The company also has a free-freeze mobile app called myTransUnion, available at the Google Play Store and the Apple App Store.
Equifax: Visit Or call its automated line at 800-685-1111.
Experian: Visit Or call 1-888-EXPERIAN (1-888-397-3742).

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