In the last post we talked about the importance of knowing what is on your credit report; a financial compilation that is held by three separate credit bureaus. By ordering free credit reports every year we are able to keep tabs on what is happening on our credit report so that we are not surprised when we go to get a loan and so that we can take steps to make credit repairs as soon as we are aware of them instead of allowing them to drag out and cause further damage.

One of the things that we can do to help rebuild our credit even if we are not able to get a traditional line of credit is to look into secured credit cards.

Secured credit cards allow consumers to have access to a line of credit that is backed by money they have put aside as collateral. In other words, no matter what the credit limit on the credit card the consumer must first match that amount that is then deposited – by the lender – into a secured savings account. That way, should the consumer default on the loan the lender is able to cover the credit limit by the amount they have in the secured savings account.

Additionally, secured credit cards provide protection for consumers as well. Because consumers have to match the credit limit with cash to be deposited into savings the credit limit is most often on the low side – minimizing the possibility that the card holder will get in over their head in terms of charges.

Secured credit cards are only one of the ways in which we can take steps to improve our credit report. Making payments on time, keeping debt to income ratio low, and limiting our open lines of credit all help to improve credit.

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