How Quick Will a Secured Credit Card Improve My Credit?
Responsible, or irresponsible, credit-account management can change credit scores. One way to improve your credit score is to open a secured credit card account and pay your bills on time. No quick fixes will improve an accurate credit score, but you can rebuild credit over time.
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Definition
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A secured credit card uses cash collateral that the consumer deposits to back up all charges. Secured credit cards often charge an application fee in addition to monthly or annual usage fees. Secured credit cards report your payment history to the three credit bureaus, Experian, TransUnion and Equifax.
Factors
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Credit scores are timely snapshots of your financial health. No one element can determine your credit score, which is derived from a combination of factors. The two most important factors are payment history and total outstanding debt ratio. Payment history accounts for 35 percent and outstanding debt ratio accounts for 30 percent of your overall credit score. The most recent activity weighs more on the overall score than old activity.
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Considerations
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Consumers with bad credit may need years to strengthen their financial position enough to qualify for an unsecured credit card. Secured credit cards offer credit power without a credit check. Find out all the applicable fees before opening a secured credit card account, since they can vary significantly between lenders.
Benefits
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Besides potentially improving your credit rating, a secured credit card can benefit your lifestyle. Purchasing items online, booking hotel accommodations and renting a car are a few of the benefits of maintaining a credit card account. As long as the available balance covers the charges, you can use a secured credit card the same way as an unsecured card.
Time Frame
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A properly managed unsecured credit card may require six months to a year to help improve your credit score. Each successive payment that you make on time adds more credibility to your overall credit worthiness. Your secured credit card can help improve your credit even if you do not use the card. Lenders will report the card as 'in good standing' to the credit reporting agencies, which will reflect positively on your credit score over time.
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Comments
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publicsvingsbnk
Sep 30, 2010
Hi, Katherine! Thanks for writing this- it's always good to educate people on credit and how to build theirs. I'd like to add that there are many factors, including the ones you mentioned, however, there is no definite amount of time it takes to re-establish and improve one's credit. At Public Savings Bank, we report your secured Visa credit card to all three major credit bureaus- this is a great factor for someone who is trying to re-establish credit. We also report it as a regular Visa credit card. The main action you should take, especially when trying to re-establish or establish credit history, is to pay your minimum monthly payments on time. Have a great day and Public Savings Bank wishes you the best in re-building your credit!
