If you’re coming out of a bankruptcy or finishing up an IVA, you’ll find that the world of credit really is a different place than when you were in it. For starters, lenders are going to want to see that you can prove yourself all over again if you haven’t learned your lesson about credit, you might find that the penalties for credit problems are much higher. However, you will need to work your way back to good credit. After all, it goes without saying that you probably want to save up for a house. You will still need to trust lenders to give you a mortgage to make your dream of owning a home come true. If you can’t do that, then this dream will fade away faster than you can blink. You are going to have to make absolutely sure that you are doing something to build credit. Of course, many wonder how that can be done when it feels like everyone is just waiting to reject you. Why not go with a secured credit card?
They used to be very unpopular, but now they’re making a comeback as people realize how powerful they can be. If you have some savings, you can use it to make a bigger deposit. Generally speaking, your deposit is equal to your credit line. So if you start the account with 500 pounds, you’re going to have a 500 pound credit line. Don’t worry about the small line of credit. Over time, this will definitely grow.
The key here — and this cannot be understated at all — is that you have to make all of your payments on time. Not only that, but you have to watch your individual as well as group utilization ratios. The individual utilization ratio refers back to the percentage of credit that you’ve used against the total balance of the card. So a balance of 250 pounds against a 500 pound credit line is 50%, but a total balance of 250 pounds against a total credit line of 1000 pounds is only 25%. Managing your overall utilization is important, but you don’t want to get too crazy with each secured card that you get. You want to make sure that you keep balances low. The important thing that you’re building here is image. So if you build the image of someone that has to use their entire credit limit every month, lenders will start worrying that you can’t manage your finances without credit. That’s really not a position to be in if you can help it.
From here, the options are endless. You can shop around for a secured credit card that works for you. Once you get it activated, you can go about using it like you would normally. The “secured” part only comes in if you happen to avoid making the payments. If that happens and you default, the deposit you put down for the card will be used to pay off the card. What’s left will be pursued by any means necessary. So clearly, you don’t want to go down that road. Credit card companies want to take a chance on you if you can prove to them that you’re worth it. Otherwise, they don’t want to deal with you if they can help it.
You have the power to turn over a new leaf and make better financial decisions than ever before. Why not check it out today, while it’s still on your mind? Good luck!