A credit card is a convenient way to build credit history. However, if you have bad credit, it is quite difficult to get a regular credit card. Most credit cards are unsecured, which means they do not require any collateral from you. There is another type of credit card that do required a collateral from you. This is usually in the form of a saving account managed by the credit card company. This type of card is known as secured credit card.
Payment history for unsecured credit cards are being reported to the three major credit bureaus. However, this may not be the case for secured credit cases. Some of them do report the payment history to the three bureaus and some do not.
If you intention is to raise your credit score, you should look for those secured credit cards that report to the three major credit bureaus. Most of the time, this benefit is highlighted in the application form. If you do not see it, you can call up their customer service hotline to enquire about it.
The way you use a secured credit card to raise you credit score is the same as with a regular credit card. You have to use the card on a regular basis and must make payment on time. Unlike a regular credit card, if you default on your payment, the credit card company has to the right to collect payment by deducting the amount from the balance in your saving account.
It is very easy to get approved for a secured credit card. Most of the time, a credit check is no required as you are going to open a saving account that serve as collateral. This means approval is guaranteed unless you are underage or you are residing outside USA.
The amount of cash deposit into your account will serve as the credit limit. You can increase the credit limit by adding more cash. In addition, the cash in your saving account will earn you interest as long as you do not default on your repayment. This is one main advantage of having a secured credit card. The other advantage is you can avoid the pitfall of credit card debt since you can't spend more than what you have in your saving account
A secured credit card is a very good option for people who has bad credit or no credit. By using them regularly and making repayment promptly, you can be assured that your credit score will raise to the level that qualify you for unsecured credit card and better interest rates.
Credit Card Credit Scores
It is estimated that 8.7 million people have bought financial products such as loans, credit cards and insurance through using comparison websites over the past year.
However, research shows that the sites could be leading consumers to adversely affect their credit rating as many of the comparison, or aggregator, sites concentrate on price rather than quality of service or suitability of a product.
As a result, consumers are drawn in to applying for unsuitable products and are therefore continuously rejected.
Although rejections are not held on a person's credit record, applications for credit do show up as "footprints".
Consumer affairs manager at credit rating company Experian, said: "All the applications you have made for credit over the past 12 months will show up on your credit report.
"When a lender carries out a credit check they will see those applications and if there are a large number of them it may make them think that you are desperate for credit, or it may even look as though someone has been fraudulently trying to apply for credit in your name," he said.
The financial comparison site that commission the report, MoneyExpert.com, states on their website that 2.8 million people have made applications for 3.5 million financial products over the past year. Around 6 per cent of people have been rejected when applying for credit cards, mortgages and loans.
MoneyExpert.com has launched a credit profiling service that allows consumers to tailor their search so that only those credit providers whose lending criteria suits their credit rating appear on the list.
The profile is based on the consumer's answers to questions about their history and no footprint is left on the consumer's credit record.
Professionals in the financial industry are now calling on all comparison sites to offer a similar service. Customers must also be warned about the potential damage to credit rating that could be done by making too many applications.
Website's should also improve their offer to consumers by being more transparent on fees and charges imposed by providers. They also need to broaden the focus of sites to include service and features other than price.
No one has an automatic right to credit, but if you are refused on the basis of your credit rating you can tackle the problem.
If the decision to refuse you credit was made by a computerised credit scoring system, you have the right to ask the lender to review the decision.
Most High Street lenders will make a decision on whether or not to grant you credit on the basis of information supplied by the UK's two leading credit reference agencies - Experian and Equifax.
These two firms compile credit histories from a host of different sources such as:
?Data held by the agencies
?Electoral register
?County Court judgments
?Bankruptcy and administration orders
?Credit payment history
?House repossessions
Your record will be highlighted if you have had a large number of credit checks carried out. Everything from buying a freezer on an interest-free deal to opening a new credit card will leave an electronic footprint on your credit history.
However, the decision to refuse credit will be made by the lenders, based on their own criteria, but if you are refused credit you could check your credit history to make sure no mistakes have been made.
Within 28 days of your last contact about a credit deal, ask the lender for the name and address of the agency which provided the information. You can then write to the agency yourself and ask to see your information on their files.
To do this you will need to send a ?2 fee, give your full name, address and postcode, as well as the details of your addresses over the past six years.
If you are a sole trader or partnership, give your business name and address in case your information is held under those details. The agency must then reply within seven days.
If you find the decision to refuse your credit was unjustified or wrong, and there is further relevant information which may change the lender's mind, you can ask the lender how to go about having the decision reviewed.
You can ask for your credit history to be changed if it is incorrect or includes details about people with whom you no longer have financial connections with.
You can also have notes attached to explain certain periods in your history. However, you can't get information removed just because you might find it embarrassing.
Most national newspapers advertise companies claiming they will repair your credit rating. However, these firms offer will charge a high fee.
You have the right to ask credit companies in writing, at any time, for a copy of your file. The Information Commissioner can provide consumer guidance leaflets with further advice.
Both Stephen Chua & Michael Challiner are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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