You may have heard it all the time, “If you want to build your credit, get a secured card”. If you have zero credit or you want to build a damaged one, secured card is a fantastic way building a good financial history. There is also a 100% chance of approval because a secured card is safeguarded by a deposit which also works as your credit limit.
A secured loan works in the same way. You will have to pledge some asset like your home, as collateral for your secured loan. In such case, the amount of debt you owed to the creditor is secured against your collateral. If you default, the creditor may take possession of it and sell it to recover the amount loaned to you.
Here are ways in which a secured loan can fix your credit with your own money and tips to get the most of it:
It helps you pay off your credit card bills on time.
Payment history is very important in the calculation of your credit score. Use your secured loan to be free of missed and delayed payments.
To do this, get your credit card’s closing date, minimum payment due date and the “grace period” for your payments. Knowing when to pay your debt down, can help you manage your little plastic cards and eventually help you improve your credit score. For example, you checked that credit card – A has a billing period that starts on the 15th of April and ends the 14th day of May. Any transaction you make within that period will be included in your monthly account statement.
So, if you want to compensate for the charges made on the card, you can pay it off or at least a fraction thereof which should be enough to cover the excess of 10 to 30% credit limit, before the closing date. Otherwise, the charges will go to your next monthly statement. With a secured loan, you don’t have to worry about credit card issuers sending reminders to pay your bill. You don’t even have to miss a credit card payment or make a late payment which will not only seriously damage your credit score– but cost you additional charges as well.
Aside from secured credit card, a secured loan is the only affordable ticket to building up your credit score.
This may be your only option available– because if you have no credit history or have a bad credit you can’t easily get any other kind of credit card, unless it is a secured card. As long as you pay on time and never miss a payment all throughout the duration of your loan, you can quickly move your way up to a good score, and possibly apply for a more affordable unsecured loan or credit card.
You can use a secured loan for new purchases. Get a home equity loan or home equity lines of credit and make timely payments not only for the purpose of improving your credit history but for avoiding the risk of losing your home, as well.
Do you have a poor credit history? Find out how Clean Credit can help you.