How Does a Secured Credit Card Work?
If you have bad credit or a negative item on your credit report, you can face a very wide range of consequences, including difficulty getting a bad credit auto loan in Philadelphia, PA or any other type of credit. Most lenders don’t want to work with borrowers who have a low credit score because buyers with low scores are statistically more likely to default on their loan. This can create a Catch-22 situation: you need some form of credit to begin repairing your score, but you can’t get credit because your score is low.
A secured credit card can be the solution to this sticky situation. When you open a secured credit card, your lender will ask you to put down a deposit. This deposit will then become your line of credit. For example, if you put down $500 in cash when you open your secured card, your lender will provide you with a secured card that has a $500 line of credit.
From here, your secured credit card works in the exact same way as a standard credit card. You’ll use it to make purchases in stores and online, and you’ll pay off your bill each month. Your lender who issued your card will report your payments to the major credit bureaus, which will raise your credit score over time so long as you keep making at least your minimum monthly payments on time. If you don’t pay back what you owe, your lender will simply keep your deposit. If you decide to close your secured card, your lender will refund your initial deposit.
A secured credit card can help you work on building credit even if you have a very low score because it doesn’t put lenders at risk. But what if you need to make a major purchase now — like buying a new car to keep your family safe on the road? PA Auto Credit’s repo finances in Trenton, NJ and beyond can assist you in getting the vehicle you need without waiting months for your score to rise. Give us a call today to learn more and get started!