Posts Tagged ‘score’

Choosing Secured Credit Cards to Strengthen Limited Credit Histories

November 6th, 2011

Consumers who are looking to boost a very low credit score after debt settlement may want to consider the benefits of applying for a secured credit card account. Secured credit cards are typically easier to get than traditional unsecured credit cards but there are some guidelines for selection and use. Not all secured credit cards offer the same benefits and if you are trying to strengthen your credit score, it is important to make the right financial decisions for your spending habits and your lifestyle.

Understanding Secured Credit Cards

Secured cards differ from traditional cards in that consumers are required to make an initial cash deposit into an account with the card provider. That deposit amount varies by provider but will become the credit limit for the cardholder. When purchases are made, account holders will receive a statement in the mail similar to traditional statements. The balance should be paid in full within each billing cycle to ensure you have full spending power.

Choosing the Right Card

There are several things you should look for in a new secured credit card to make it advantageous to your current financial situation and future credit goals. These considerations include:

Credit Reporting

A very important term of a secured credit card for the cardholder trying to improve a weak credit history is to ascertain whether or not the card provider will report account activity back to the consumer credit reporting bureaus. Secured cards from providers who do not report account data to these agencies are not beneficial to your credit improvement goals. If there is not evidence of the provider reporting credit data to consumer credit bureaus, contact the company directly to inquire before selecting a card.

APR Terms

Since secured credit cards are often offered to those who may be a credit risk to card providers or those who have a limited credit history, the annual percentage rate on this type of card will generally be higher than APRs on traditional credit cards for consumers with good credit ratings.

Fees and Penalties

Again, secured cards are often used by those not yet proven to be creditworthy to traditional lenders. As a result, many secured card providers tack on fees for multiple services including monthly account maintenance. Secured cards may also have stiffer penalties for late payments or for overextending your credit card’s spending limits. These fees and penalties will be outlined in the fine print of the card agreement so be sure to read it thoroughly and carefully.

Deposit Requirements

While many secured credit card providers will require between $300 and $500 in upfront deposits, some providers may insist on more. Find a card that has a deposit requirement that is reasonable for your personal budget but will also give you some spending power after monthly account fees have been deducted.

Using a Secured Card

Secured credit card use is the same as using a traditional credit card. You should be careful to never exceed your limits and that you have the financial capabilities to repay what you have spent. Even though money was deposited into the account beforehand, you still have an obligation to pay back what you have charged on a secured card. Additionally, you should make a point to pay the bill on time and in full each and every month if you expect it to boost your credit rating.

Using your card regularly for specific purchases like gas and groceries can allow you to better track your spending and stay in control of your personal budget at all time while on the road to a better credit score. After using a secured card for several months or for as long as a year with good management of your account, you may improve your credit history enough to qualify for a traditional card with a good interest rate.

Posted in Credit Card Debt

4 Charges That May Be Reduced During Debt Reduction

November 3rd, 2011

Once bills become past due, late fees may be added to the total. Late fees can add up quite quickly, effectively making a bad situation worse. These fees are indeed negotiable, and may be waived altogether. Once late fees are removed, your outstanding balance will drop, making it easier to satisfy the debt. In some cases, only a portion of the late fees may be removed. However, it is important to remember that any reduction in the total amount owed is a good thing.

Over the limit fees may also be negotiable. These fees typically only apply to credit card spending. Many people exceed their allowed credit limit on accident. This is easy to do if you do not track your spending carefully. Over the limit fees can range from $20-$40, depending on the credit card provider. Though you will have agreed to being subject to these fees when you accepted the card, it may be possible to have them removed or reduced.

While each of these types of fees can add up, what it truly painful is large amounts of interest. Interest is how credit card and loan companies make their profit. In terms of debt reduction, it may be possible to have this interest rate lowered, effectively reducing the total amount owed. In some cases, the total dollar amount of interest can be completely eliminated, leaving you to only pay for the purchases that you made, or base loan amount that you received.

It is rare to have the base loan amount, or amount of actual purchases, reduced. That said, it has occurred. When faced with the possibility of a consumer filing bankruptcy, a company may decide that some money is better than no money, and agree to settle the debt for a lower amount. It is important to note that the debt reduction specialist that is working on your behalf will attempt to get all amounts lowered, not just fees and interest.

Finding a reputable debt reduction company to work with is important. There is a cost for this service. A reputable company will have reasonable fees. Many people find that the amount of money that is saved from using a debt relief company will far exceed the cost of the service.

The process of debt reduction is quite simple in theory, yet may be difficult to carry out on your own. This is why many people turn to debt relief companies for help. Though your credit score will have suffered by the time you find that you need help, it will be much better to have outstanding debts listed on your credit score as paid in full.

Posted in Debt Relief