Sometimes, circumstances can cause a person’s credit history to suffer. In the US, thousands of families had been affected by the recent economic recession in one way or another. Many employees found themselves out of work all of a sudden. Even those who enjoy a high position in the company were not exempted from being thrown out of their jobs.

If you presently have bad credit, don’t lose hope. You can take positive action to improve your personal credit one step at a time. In this article, let’s talk about how you can use a secured credit card for rebuilding bad credit.

Secured Credit Card for the Credit Challenged

A secured credit card is a type of card especially designed for people with bad credit. It is also referred to as a bad credit credit card. While standard credit cards are only offered to people with good credit, secured credit cards give people a chance to open a credit card account and prove their credit worthiness.

What makes it different from a standard credit card? A secured card requires the submission of security deposit. The amount of deposit depends on the credit card issuer and can range anywhere from $200 to $500 or higher.

The deposit will serve as a guarantee for upcoming credit card charges. For this reason, the account holder’s credit limit is determined by the amount of the security deposit. Some secured card issuers may provide a slightly higher or slightly lower credit line than the amount of the security deposit.

Let’s say for instance that you submitted $300 in your deposit account. This means you can enjoy up to $300 of credit line, depending on your chosen secured credit card. Some issuers may provide you with $350 of limit while others may offer less than $300.

The purpose of the security deposit is to prevent defaults. Thus, it gives credit card issuers the assurance that in case the cardholder fails to pay debts on time, funds will be easily available to pay off past due charges.

Secured Credit Card for Credit Repair

How can you use a secured credit card for repairing bad credit? By keeping the account active and submitting your payments on time. If you will use your credit card regularly and promptly pay off your charges, your record will show that you are capable of managing debt effectively.

Be sure to choose a secured credit card that will report your payments to the three major credit bureaus. In addition, see to it that your secured card has a reasonable rate of interest and minimal fees.

After a few months, you should be able to see improvement in your credit standing. Hence, it’s a good idea to check your credit report after six months of using your secured credit card.

Sometimes, you may need to work on improvement for up to 12 months or longer, depending on how bad your present credit score is. Even if you have an extremely low score, rest assured that you will be rewarded for your hard work.