What do you mean by a ‘secured credit card’?

Secured credit cards are another very popular breed of credit cards. Secured credit cards, as their name suggests, are secured. Well, they are secured for the credit card supplier, really. Secured credit cards require you to open an account with the credit card supplier and maintain some cash balance in that account. This cash balance acts as a security for the supplier of secured credit card. Your credit limit is dependent on the amount you hold in the account that you have started with the supplier of secured credit card. This is generally between 50 to 100% of your account balance. So in that sense, secured credit cards are not really credit cards (since they don’t offer you any credit really). For this reason, the secured credit cards are sometimes also referred as debit cards.

Why is the concept of secured credit cards so important? 

As we know, credit card debt is a raging problem which is caused by improper usage of credit cards. Such people end up spoiling their credit rating to an extent where they cannot get another unsecured credit card (that is what we call the commonly used credit cards). Even after they have paid off their dues and cleared their debt, their credit rating still haunts them. For such people, secured credit cards are a boon. Secured credit cards present them with an opportunity to not only get a credit card in the first place but also to improve their credit rating by using the secured credit card in a disciplined way (paying their dues in time, controlled spending, utilizing a maximum of 70% credit limit etc etc). As they continue with these good habits, their credit rating gradually improves over a period of time. Hence secured credit cards provide them with the means of rectifying their mistakes (credit rating). 

It’s not just the people with bad credit rating who go for secured credit cards. Some people go for secured credit cards because they don’t want to bother themselves with the bills etc for credit cards. They don’t like to even fill-up application forms for unsecured credit cards. 

Then there are some who just don’t like to borrow money (even if it means borrowing from a credit card supplier by using their credit card). However, such people are very rare to find. 

Some people just go for secured credit cards because they have heard a lot of horrifying stories on credit card debt – maybe someone from their family or one of their friends was devastated by credit card debt and they don’t want to repeat the mistake. So they decide to go for a secured credit card.

Whatever be the reason for going for it, the secured credit cards are surely popular too. 

Best Cards to establish or rebuild credit

Establishing or rebuilding poor credit is a challenge and most people will apply and be denied numerous times before they are granted an unsecured line of credit so to save time and reduce the number of unnecessary hard inquiries made by creditors when your application is submitted I have gone ahead and created a list of the best cards to apply for  based on personal experience and knowledge of the various creditors guidelines for approvals thats not publicly available.  The most obvious ones that a person with no credit or poor credit could likely obtain would be a secured card but this list focuses on unsecured credit lines which would be the most favorable option.

Lets begin with store charge accounts which usually have two ways you can be approved.  The first is an approval for an in store only charge account and the second is a major credit card that offers additional perks when used in the store its been branded for.  From experience most if they will extend you credit at all will likely approve you for a major credit account.  In both scenarios either having no credit or having poor credit I have yet to receive an in store only charge account and am unaware of anyone else personally that has either.  The stores I would recommend submitting applications with would be Sears, Home Depot, Kohls, Walmart, JcPenny, Macys, Victoria Secret, Pier 1, Express, Home Shopping Network, Bealls or Sports Authority.

In addition to store cards the next best option is cards that come with high fees in exchange for extending a small amount of unsecured credit.  Your best options for these high fee cards are the Total Rewards Visa or Credit one card.

Bottom line is that although it may be tough for those with no credit history or poor credit there are still creditors out there that will extend you credit.

Building New Credit Habits

Repairing your credit entails getting rid of the

negative credit report information and catching up on

your overdue bills. This could raise your credit score

but might not be enough to make you credit worthy

again. However, to raise your credit score high enough

to entitle you to a loan, you have to rebuild your

credits. Doing so would only prove that you have the

capability to handle credit responsibility.

Although it might be difficult to start, but once you

achieve that momentum you need, you will be sashaying

to a good credit score. You can always begin by

developing the required credit habits.

The Do’s of Using Your Credit Card Wisely

Although many people are born without the skill it

requires to use credit cards, it is important to learn

the rules of the game. All you need to do is to

remember simple do’s and don’ts of credit card usage

and in time, you would welcome healthy spending habits

in your financial life.

The first thing you do want to ever do is to use your

credit card to make your everyday purchases,

especially food, gas and clothing. It is bad enough

not to have cash-on-hand but buying simple everyday

items can develop into a habit wherein you may tend to

substitute a credit card with cash. It is always

advisable not to take your credit card out of your

wallet for everyday purchases but instead use your

cash or a debit card.

The next thing you do not want to do is develop a

habit of making minimum-only payments. If you make

minimum payments each month, you are only increasing

the length of time it will take for you to pay off

your debt. Additionally, it will also increase the

amount of interest you could end up paying.

If you are one of those people who usually buy things

that are way off budget, remember not to use your

credit card to buy things you cannot afford. One way

to get into debt is living off borrowed money. You

might end up waking one day realizing you are so much

indebt that you wish to return your expensive

purchases back to wherever you bought them from.

The Do’s of Using Your Credit Card Wisely

Learn how to make correct decisions when it comes to

buying items you need against those you simply want.

Everybody knows what a "need" is and what a "want" is.

Remember not to substitute need from the want and vice

versa. If you are using your credit card wisely, it

only means that you are being responsible in

recognizing what things you need and which you only

want.

Next, always let your creditor know in advance if you

would not be able to pay your monthly payment on time.

Since most creditors offer assistance with your

payment if you give them a heads up, it is important

not to simply forget about the payment for no reason

at all. You can do this by simply calling your

creditor, explain the situation and ask if they allow

late fees to be waived.

Lastly, do not exceed with your credit limit. The

safest is to stay within at most 30% of your credit

limit. Because the major part of your credit score

reflects on the quantity of debt you actually have, it

is important to keep your balance low in order to

preserve a good credit standing.

Good Credit Maintenance

Maintaining a good credit is important to your

financial life. There are people who experience poor

credit report due to neglect and improper report

reviewing. There are even others who went through the

process of repairing their credit and somehow managed

to maintain good credit after. If you do not want to

ever need a credit repair, good credit maintenance is

advisable. Luckily, simple steps can help one in

proper maintenance of a good credit.

The Importance of a Good Credit

Credit history plays in important role in determining

whether you are qualified for a loan or not. The

credit is really worth a thousand words and it says so

much about the consumer. Not only can it affect your

finance but other aspects of your life as well.

Several counselors and services agree upon on thing:

maintaining a good credit is important in leading a

fit financial life.

Most people do not realize that landlords, employers

and companies checks credit scores before making a

decision on whether or not they can grant a contract

or a job. The scores and credit report can help

companies decide whether you pay your bills on time or

if you have filed for bankruptcies. By doing so, they

can use the information on your credit report as a

future marker of your credit worthiness.

What You Can Do

Although maintaining a good credit can be quite a

challenge, there is no better way to keep you safe

from debt than by carefully following your spending

and always sticking on a budget. Budgets are important

as they can aid you in controlling your finances,

decreasing your debt and building a strong credit

history.

In the topic of managing your debt, the first thing

you can do is to keep track of your spending habits.

You can do this by creating drafts of what you spend

and track anything that you might owe. Monthly

statements should be reviewed when they arrive and

always check for any possible inconsistencies.

Additionally, always remember to report them

immediately.

To keep your account in good standing, always remember

to pay the creditor on or before the due date normally

printed on the statement. Do not skip on any payments

and strive to pay more than the minimum or, if

possible, pay the whole balance each month.

Another step you can take is not to exceed your credit

limit. The available credit is the amount left on your

credit usually represented by the difference between

your credit limit and your outstanding balance. Always

remember to maintain the balance lower than the limit

of the credit. Additionally, make sure to add any

charges you made after the closing date to your

Outstanding Balance included in the monthly statement;

doing so can help you find out just how much credit

you have left.

Sticking to a budget is also important. Typically, 10%

of your monthly income should be used in paying your

credit lines, bills or personal loans. However, in

case you are paying more, it is time to reconsider

your habits of spending. Keep out of impulsive buying

since they are especially hard to pay off.

Lastly, control your finances. It is advisable to

create a payment plan, which can help you get on the

right track. This kind of scheme should incorporate

those whom you need to pay and the amount of the

payment each month. Normally, other people limit their

credit usage until the finances are under control;

this is an excellent method of controlling your

finances.

Tips To Apply For A Credit Card

Filling out a credit card application is just like filling out a job application-everyone needs some tips to use so that they get approved.

If your credit is bad, then it may be a little more difficult to get a credit card than if you have good credit.  Do not give up, because there are hundreds of companies out there that offer credit cards for people with bad credit and if you shop around, you will find the credit card that is just right for you.  

If you are researching credit cards, the first place that you can get information is the Internet.  The Internet has a lot of information about many different credit cards, including their rates, fees, and incentives, so that you can find the best credit card for you.   

There are some credit card companies that say that they will give you a credit card with no credit check.  However, keep in mind that having a credit card almost always means that you are going to go into debt.  Be cautious when choosing the credit card for you.  Read the fine print of their terms and agreements to make sure that there are not going to be any surprises.  

Analyze your financial situation to make sure that you can handle a credit card and its payments.  Even the most cautious of us go on a little shopping excursion every now and then and you do not want to be thrown into a financial tailspin when your bill comes in.   

Cautiousness is very important in using your credit card.  If you are not sure that you can handle a credit card, then rethink applying.  You need to be sure that when the bill comes in that you can make the payments.  If you are not completely sure, then don’t get a credit card until you are ready.  

Building Business Credit Scores

To be able to avail of many financing offers by many lenders, having a good credit score is a must. If you have one handy, this will allow you to get a decent amount with reduced interest rates, with flexible payment terms.  But building your business credit score is no easy feat to accomplish.

If you just have started earning your business credit when you set up your business venture, then it’s quite easy to get a good rating within 1 to 2 years of its operation.

This is not the case, however, when you have a bad credit rating. You either have to repair your business credit on your own, or hire a credit repair professional to get the job done. Only when you fixed your score can you start to build it up.

But before you can actually start building business credit scores, you need to have a credit identity first. This can be done by putting up your business as a corporation or an LLC. These two are perfect statuses to start your business credit. Since most financial lenders are eyeing clients in corporation or LLC, having your business as one will allow you to get a loan faster than any business enterprise.

You also need to set up a credit record with a credit agency, or Paydex. Credit agencies will keep track of your credit transactions, rate them and give them scores. This will be used to determine how good your credit rating is when a financial institution does a credit check.

Paydex scores by big companies like Dun and Bradstreet will keep records on how well your company is paying your credit bills. The score ranges from 0 to 100 – the higher the score, the bigger the possibility your loan will get approved.

Now that you have established your credit identity, you need to apply for a loan before you can actually start building your business credit scores.  First, you can choose either a secured loan, where the lender will ask you to pledge assets or properties as collateral that will serve as security for the loan. Note that this kind of loan will let you borrow a much larger amount (depending on your collateral), and a much reduced interest rate.

Another type of loan is the unsecured loan, which is perfect for those who don’t want to put their assets at risk by setting it up as collateral. Since the risk to the lender is higher compared to unsecured loans, the financial institution might be very strict with its application, coupled with a higher interest rate and payment schemes.

Next is the type of credit you want to be used in your business venture. Below are the most common credits you can bring out in any lender in your area:

1. Business credit card

Quite separate from a personal credit card, this type of credit is more lucrative to be used in business ventures due to its reduced APR, and flexible interest rates (depending on the amount used within the month).

Why Should I Separate My Personal Credit from My Business Credit?

Most people who want to start up their own businesses today usually make use of personal resources to finance their ventures. They either utilize their   savings, loan money from significant others or even use up their retirement funds. 

Due to mixing their personal accounts with that of their business’ transactions, these people often risk utilizing their major assets for collateral, give personally guaranteed business mortgages, and so on. They often end up pushing their personal credits to the limit. And whenever this happens, they are left to compromise their personal financial security. 

It is sad to say, however, that a significant percentage of small firms operate through personal credit cards. What these people should actually know and should be doing in running their ventures is how to separate their personal credit and their business credit and how life saving this can be, not only for the company, but for their personal assets as well. 

The use of credit cards in small businesses is currently on the rise. What this does is that it protects both of the entrepreneur’s personal as well as business assets and allows opportunities for better growth and organization to the company.

Personal Advantages in Using Business Credit

Through separating the personal account with the firm’s business account, one is able to protect private assets in case something goes wrong with the financial status of the company. In that way, one’s personal security (especially for those with families) would not have to be compromised. 

In instances wherein a firm that goes bankrupt does not have corporate credit, one can be held responsible for any of the company’s expenditures both legally and personally. Separating accounts would entail one to give added protection on savings and properties that one worked hard for in a long time. 

Corporate Advantages in Using Business Credit

Owning a business credit could also improve the financial flow of one’s company as well as help the company grow. One very good advantage is being able to save a lot of money. By having a good credit profile for the company, business owners have the option of lowering interests for leases and loans. It also becomes easier for the company to add more employees, raise inventory and attain discounts for goods. 

Unsecured Business Line of Credit

To add to the capital of their business ventures, many investors are applying for financial loans to make it possible. Unsecured business line of credit is readily offered by lenders, if you are able to pass their requirements. 

Unsecured business lines of credit, financial loans usually offered by big-time lenders like banks, is a credit line which does not involve any collateral. This is quite favorable for individuals who have no plans to put their assets and investments at risk in case something goes wrong; as with most cases with secured loans where many lenders asks you to pledge a security in the form of residential or commercial properties, equipments, or other assets with the same value as with the borrowed amount.

This kind of financial aid is quite risky to lenders since they don’t have any security if the borrower fails to pay for it - a reason for their stricter application requirements and being accepted for one is almost near to impossible. Here are some steps to get your started on a successful application of an unsecured business credit line:

1. State Your Business

First off, you need to establish an independent business existence for the venture. Your business must be registered as an LLC or a corporation with at least 2 years of successful operation. The reason why lenders prefer the operation time of 2 or more years is because of the risk of bankruptcy attributed to new small business ventures.

Also, you need to include a proper address of your business, and not a P.O. Box address (which is unacceptable for financial loans). An open communication line like landline and fax numbers registered under the name of your enterprise is needed as well.

All legal documents about your business should be at the ready. This includes permits, licenses, contracts, tax documents, and financial statements like balance sheets, income statements, and so on. 

Some financial institutions might request personal information such as driver’s license, verification of personal and business-related bank accounts, personal income statements, and tax returns. Be sure to have these at the ready when the lender requests for them.

2. Register Your Venture To The Proper Agencies

You need to have a credit profile first before you actually apply for a loan. There are plenty of agencies that offer such services such as Dun and Bradstreet. Credit agencies are also a requirement, since they can keep tabs on your credit scores and rate them to be used with financial institutions when you apply for an unsecured business line of credit.

Also you need to have a Paydex registered under the name of your business venture. A Paydex provides reports to credit agencies, financial institutions, banks, and other lenders regarding payment records of certain companies or business enterprises. The Paydex score is from 0 to 100, where 0 being the lowest. The bigger the score you have, the more easily you can get any financial loans you wish.

3. Presenting Your Application

Aside from the requirements above, you need to have a decent proposal at the ready regarding your unsecured business line of credit. You need to state in detail why you need the amount, and where you plan to use it. This is also very important in establishing your credit scores as well. In truth, the lender is putting you in trust of the borrowed money, and is expecting you to use it wisely, and to make prompt payments according to your agreement. 

Credit Card Application Tips

Filling out a credit card application is just like filling out a job application-everyone needs some tips to use so that they get approved.

If your credit is bad, then it may be a little more difficult to get a credit card than if you have good credit.  Do not give up, because there are hundreds of companies out there that offer credit cards for people with bad credit and if you shop around, you will find the credit card that is just right for you.  

If you are researching credit cards, the first place that you can get information is the Internet.  The Internet has a lot of information about many different credit cards, including their rates, fees, and incentives, so that you can find the best credit card for you.   

There are some credit card companies that say that they will give you a credit card with no credit check.  However, keep in mind that having a credit card almost always means that you are going to go into debt.  Be cautious when choosing the credit card for you.  Read the fine print of their terms and agreements to make sure that there are not going to be any surprises.  

Analyze your financial situation to make sure that you can handle a credit card and its payments.  Even the most cautious of us go on a little shopping excursion every now and then and you do not want to be thrown into a financial tailspin when your bill comes in.   

Cautiousness is very important in using your credit card.  If you are not sure that you can handle a credit card, then rethink applying.  You need to be sure that when the bill comes in that you can make the payments.  If you are not completely sure, then don’t get a credit card until you are ready.  

Interest Rates

These days interest rates for the various types of credit such as credit cards, mortgages and auto loans are offered with largely different cost associated with them in the way of interest rate.

Credit card interest rate are currently significantlly higher than the interest rates of home loans with the average consumer credit card interest rate around 21% for individuals with fair credit according to research surveys.  With all the economic stimulus and relief programs offered by the government to assist in these arduous economics time why are the creditor not passing along this relief to consumers struggling to make their monthly credit card payments?  The reason is because unlike other types of debt credit card debt is not secured by any type of collateral so it is much more risky and therefore more expensive.  But thats not the only thing that has led to very high interest rates on credit cards.  The second cause of high interest rates is the 2009 credit card law designed to protect consumers by capping penalty fees has reduced creditor profits and in response creditors raised interest rates to recoup the lost income.    

Steps to Establishing Credit

Establishing Credit

With the substantial impact your credit score has on your financial flexibility,  buying capabilities and the cost of borrowed money its critical to meticulously establish, develop and maintain your credit history and its corresponding credit score.  Establishing your credit profile is the first step to building a stable and prosperous financial future.

1.)  The first step to establishing your credit is to create banking relationships by opening a checking and savings account and by maintaining these accounts in good standing it will then exhibit to lenders that you are responsible and capable of managing your money.

2.)  The next step when establishing your credit history is to then apply for a secured credit card which is a credit account with the credit line that is determined by the amount of your collateral deposit.  After obtaining a secured credit card most card issuers will then evaluate your account periodically and based on the accounts history offer to upgrade the account to an unsecured credit line. 

3.)  Once you have progressed to unsecured lines of credit it is best to start with retail store charge accounts since they tend to be fairly easy to get approved for.  Retail store such as Sears, Macy's, Home Depot, Walmart, Jcpenny's, TJMaxx and Lowes all offer easy to acquire charge accounts typically with a line of credit of $300 to start.  I would recommend obtaining at least 2 charge accounts and upon receiving your new card make an initial small purchase that you can payoff when the first statement arrives.

One critical mistake most make when establishing credit is closing old accounts when new ones have been opened.  A heavily weighted factor used to determine your credit score is the age of your oldest active credit account.  Most feel that when a new account with lower interest and better incentives is opened that they should close an account with high interest and few incentives since it will most likely no longer be used. However in doing so you then change the age of your oldest active account which will in effect significantly lower your overall score.

4.)  Once you have upgraded from a secured credit card to an unsecured credit card and acquired 2 retail store credit accounts the next step is to be patient and wait about 6 months before applying for any new credit accounts and alloow your history to age.  While doing so ensure all your payments are made on time and you are not utilizing more than 25% of your usable credit.

5.)  After you have allowed for some time for your credit history to age you can then look into applying for a credit card with the best interest rate or best rewards depending on what benefits you most based on your credit card usage. Upon obtaining the credit card of your choice you will need to then wait another 6 months to 1 year and again apply for a well suited credit card account.

6.)  Once you have successfully completed the previously defined process your credit score should be somewhere between 750 and 800 and you can then begin to explore more significant purchases such as a mortgage to purchase a home or auto loan to purchase a new car.

At this point your credit will be well established and how you manage it will determine its progression over time.