A number of different factors can have an impact on your credit score, and your score normally changes to some extent every month. Taking out a secured credit card can cause an increase in your score; but everybody has a different credit report, and taking out a secured credit card can have different impacts on different people. In some instances, a secured credit card will have no impact on your credit score at all.
Secured Cards
When you obtain a secured credit card, you have to secure it by making a cash deposit into a linked savings account or certificate of deposit. The card issuer allows you to use a credit line that amounts to no more than the amount of your deposit. You cannot access the money in the savings account until you pay off and close the credit card. If you default on the credit card, the card issuer liquidates the savings account and uses the proceeds to pay off the credit card.
Credit Reporting
A credit card does not directly impact your credit score unless the card issuer reports card activity to the credit bureaus. Typically, creditors make monthly reports to Equifax, Experian and TransUnion that contain details of your account balance and your recent payment activity. However, a card issuer has to pay a fee to establish a reporting relationship with the credit bureaus, and some companies choose not to make reports. Therefore, if you take out a secured credit card in order to build your credit, you should first find out if the card issuer actually reports information to the bureaus.
Usage
If your secured credit card issuer makes monthly reports to the credit bureaus, then every time you make a payment, it shows up on your credit report. On-time payments have a positive impact on your credit score, but late payments and missed payments have a negative impact. Your overall revolving debt balances also have an impact on your credit score. If you carry high balances on credit cards, including secured cards, then you have a high utilization ratio; that has a negative impact on your score. However, keeping a small balance on a secured credit card has a positive impact on your score because it shows that you can manage credit, and that you are not so desperate for funds that you have maxed out your card.
Considerations
Each of the credit bureaus has its own scoring system, but all three bureaus give consumers credit scores ranging from 300 to 850. If you have very little credit other than your secured credit card, then your secured card can have a huge positive impact on your report, assuming that you pay it on time. However, if you have dozens of other credit accounts, and negative events like bankruptcies, then having a secured credit card may have very little impact on your score.
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