This guest post is from Victoria, my girl and 1/5 of The Frugal Fab 5, over at My Fab Fico, another personal finance blog that you guys should watch. Today, she is talking about how to improve your credit score.
*Disclaimer, this article is primarily for those of us who don’t have a fab Fico just yet. This one is for the readers with, and I say this with love, a foul Fico.
If your credit score is considered low or poor ( in my gracious opinion this is anything under 610), you know its very hard to get approved for a card whose APR isn’t going to be through the roof. Pretty much no one but Capital One is willing to throw you a bone. Don’t worry, there is hope, the irony is that you may actually NEED a credit card in order to raise your score. Let me introduce you to *Drum-roll Please*
The Secured Credit Card
A secured card works the most like a debit card. You must have the cash up front. You make a deposit into a CD account- let’s say $1,000. That deposit now becomes your line of credit. With your new $1,000 credit line, you now have the chance to prove yourself, by making payments on time and paying off your entire balance every month. The Secured card reflects on your credit report as any other line of credit, and it doubles as a savings account as well. Honestly in my eyes this is a credit rebuilding WIN-WIN.
There are a few things to look out for to make sure you are getting the most out of this secured card.
1. Your card needs to report to all 3 credit bureaus. You need all three to see that you are doing your thing with this new line of credit. Don’t assume that every trade line is reported to all three- that is the reason you have 3 different scores in the first place.
2. The card should have low or no annual fees and no application fee. You are already coming out of pocket for the credit line, get the most out of your investment.
3. The card issuer should have other credit cards available that are unsecured. You should be on the path to upgrading to an unsecured card with higher limits as your credit improves.
In my research I really like the secured card USAA offers. (Yes that’s Tonya’s bank) This whole time she has been gushing over them, I thought they were for military people only. Fortunately their services extend to the rest of us.
Go ahead and comment below with your favorite secured card offer!