What Is A Secured Credit Card?

What Is A Secured Credit Card?

I am often asked “What is a secured credit card and should I get one?”  Secured credit cards have their place.  They are not the best thing as we all know but there are times when you have to start somewhere and secured cards are a great place to start to rebuild your credit.

Even if you wish to live without credit cards, you need to realize that there are times when you need to have a credit card such as renting a car, buying anything online etc.  Having a credit card that is used correctly will also help you raise your credit score and therefore help when the time comes to buy a home or a car.

If you have poor credit, no credit or are recovering from a previous bankruptcy, a secured credit card might be your only option.

When you get a secured credit card, you will be required to deposit money as collateral.  The amount of money you deposit will be your credit line.  If you deposit $300, you will have a $300 credit line. You can always add more money to increase your credit line.  Usually between 9-12 months the bank will review your account and if you have paid your payments on time and are in good standing, the bank will convert your account to a regular credit card and refund your deposit.  They will also usually increase your limit. If you feel a secured card is for you, you may have a few questions:

• Where Do I Get A Secured Credit Card? If you are a member of a credit union, call them and ask if they offer a secured card. Roughly ½ of all credit unions will offer a secured card.  If not, you can try one of the places shown at the end of this email.
• What Are The Charges?
  Every secured card is different and this is something you should look at.  If you look at my list below, the top 2 do not have any fees associated with the account while the bottom two do have fees.  You should also view the terms and conditions when you go to their site and evaluate them closely.  You don’t want to get a secured card that has so many fees it takes your entire deposit.
• Do I Have To Deposit Money?
  Yes you do. That is the whole concept here. They give you a credit card and report to the CRA’s. This will build your credit. Remember when your credit is bad, you have no credit or are recovering from bankruptcy many places will not give you a chance until you prove you can handle a credit card.  This is the purpose of the secured cards.  You will pay into it what you want your limit to be. Some secured cards do have a minimum such as $300.
• Do All Banks and Credit Unions Offer Secured Cards.
  No they do not. About ½ of all credit unions will offer them but the industry is changing.  Some credit card issuers are offering some subprime cards with a low limit such as $250 but then charging interest rates as high as 79%. The $250 credit limit comes with fees and an incredibly high interest.  Secured cards are a good choice if you can put the deposit in because you will get that money back when the account converts to a unsecured card rather than the fees being added to the card and being lost money.  In many cases, the secured card is the only option.
• Are there any problems to watch out for?
  There always is.  Do your homework and evaluate fees.  Some cards will give you credit but then say you have to buy an insurance policy worth x amount of dollars.
• Do They All Report To The 3 Credit Bureaus?
  No they do not, although most will.  This is important because the whole purpose of these cards are to rebuild credit.  If they don’t report, you aren’t gaining anything.  The cards I have at the bottom of this post all report to the CRA’s.
• When Will It Be An Unsecured Card?
  The average time is one year.  I have been hearing complaints from those who have Bank of America secured card that they are not getting approved for the unsecured card even with regular payments and being on time for the entire year as they still look at your past credit history in their evaluation.
• Now What Other Things Do I Need To Do?
  Never charge your card higher than 30% of your available balance.  30% of your credit score is based on your credit utilization and staying under 30% will give you the optimal benefit to your credit score.

Secured credit cards are not the best and no one wants to have to use these to get going but they are often the only choice you have to begin to rebuild your credit. Go into with an open mind that this is a necessary step and something you need to do for a year.  It isn’t that bad and can’t be worse than how things have already been for you.

Before you know it, you’ll be on the road to good credit and happy that you took this first step.

These are all 3 secured cards that do report to the 3 credit bureaus. Double check before you apply that they do not have annual fees.  As of the time of this post, none of them have annual fees.  Also notice the Platinum Zero card carries a 0% interest.. not just an intro interest rate but lifetime.  Even the other one only has 11% interest which is great for a secured card.  These are very good options.

The Credit Dispute Process and Rebuilding Your Credit

What Happens In The Credit Dispute Process When Rebuilding Your Credit

When you start your journey of rebuilding your credit, one of your first steps is your credit dispute.  You will write a letter that lists, in detail, all items you find that you need to dispute. You will briefly explain why the items doesn’t show on your credit report.  The FCRA requires the Credit Reporting Agencies (CRA’s) to investigate your dispute and if the lender can not verify the accuracy of the account within 30 days, the CRA must delete the account from your credit report.

Here is the credit dispute process step by step:

• Mail your letter certified mail, return receipt requested. (make sure you keep a copy of everything you send them
• The credit bureau receives your letter with your credit dispute. They must sign for this and now you have proof of when the 30 day time limit is reached.
• The CRA starts your dispute file. They are required to keep documentation of their efforts and all of the documentation you may have sent them.
• The CRA forwards your dispute information to the lender.  You may think the CRA spends a lot of time determining how to handle your dispute but reality is your disputes are handled so quickly and pushed through the system.
• The lender is now given 30 days to respond to the dispute and to verify the information they are reporting.
• If the lender verifies the information is correct, you will get a response from the CRA saying the tradeline is verified.  If the lender fails to respond within the 30 days, the CRA must remove the entire tradeline from your credit report.  The lender may also update information that is incorrect.
• The CRA will send you a notification of items that are verified, updated and deleted.

Now, here is the point where you will need to evaluate your next step. The lender may not have provided proof to the CRA and you may need to be more diligent and file the dispute again.

Remember the CRA’s receive thousands of disputes per day. They do not have the time to carefully evaluate each dispute and the process is largely automated. It is unreasonable to expect the process will be handled accurately and completely the first time so don’t be taken aback when something you know is incorrect is verified.  Just start again and move forward.

The process of rebuilding your credit takes time but can happen with persistence. If you need to file a credit dispute more than once, this is very common so don’t feel you are ‘unlucky’.  Just move forward and you will see things drop off or get corrected.

Clean Credit? Improve Credit? Rebuild Credit? How?

Many people ask, “how can I get Clean Credit, Improve Credit or Rebuild Credit?”

Many people believe that they can’t get clean credit or even improve credit on their own.  They feel that going to a credit repair agency is their only option.  This is false.  I won’t ever say that it is ‘easy’ to do-it does require time, it requires you to be active and keep good records and follow through but if you take it one step at a time, it is not overwhelming and you will feel a huge sense of accomplishment when you see things falling off your report and your credit score going up.  To improve your credit score, on your own, is a very powerful feeling. You’ve been in a bad place and now is the time to start the rebuild credit process and start fresh!

For more detailed information see the previous post on pulling your credit report and credit disputes. And this previous post on how to improve credit.

There are far too many steps to list on one post so I’ll focus on credit disputes. Once you have your credit reports  (see link above for details on where to get them) in hand, it is time to begin.  You really should prepare yourself for the process.  Depending on how much credit repair you need to do, you need to have either one binder with dividers for the three CRA’s (credit reporting agencies) or a binder per CRA.  You will want to copy or print two copies of your credit report so you can make notes on the copy and keep one untouched.  Every single letter you send out should be placed in the binder as well as any notes you make about issues on your credit report.  Every bit of correspondence that is mailed back to you should be placed in the binder.  You will forget steps you have made so you need this information all contained.

The second thing you need is patience.  To clean and improve your credit it takes time and the 30 days the CRA has to give the lenders to respond to your dispute will seem like it is a year.  Just think of all the months that have passed with poor credit and now you are taking the steps to rebuild your credit. While it seems like you aren’t doing anything… things are happening in the background.

Now there are two theories on disputing. Some people believe you should dispute everything-even if you know it is your account/issue.  They believe that they are one side of the equation and the lender can verify the account is reporting accurately and then the tradeline stays on your report  or if they fail to respond within the 30 days, it is their issue-they had their chance and now it comes off your report.   The other theory is if you know it is your debt, then man up and take care of it.  I’ll leave you to which viewpoint you subscribe to.

When you send your letter for the credit dispute, you can make it very simple.

My name is xyz, my address is xyz, my date of birth is xyz.  Credit report # is xyz.  (It is optional to include a copy of your Drivers License but know that you may get a request back asking you to provide it)

I am disputing the following items listed on my credit report as they are not mine:

Item 1: list account information as shown on report.

Item 2:

Now when you get the letter back from the CRA with the list of items they updated or deleted, you can dispute again, for a different reason but it is possible you may get a letter back saying ‘already verified’.  The success of a 2^nd dispute varies but it is always worth a try-especially if you know the item is reporting incorrectly.

More steps to improve and clean your credit will be coming.  There are many steps you can take to rebuild your credit and credit disputes is just the beginning.  Shortly you will have the answer to “Can I Clean Credit, Improve Credit or Rebuild Credit?”  YES YOU CAN!

TaTa

The Lengths We Go To To Rebuild and Improve Credit

By CANDICE CHOI (AP) – Dec 17, 2009

NEW YORK — It’s no mistake. This credit card’s interest rate is 79.9 percent.

The bloated APR is how First Premier Bank, a subprime credit card issuer, is skirting new regulations intended to curb abusive practices in the industry. It’s a strategy other subprime card issuers could start adopting to get around the new rules.

Typically, the First Premier card comes with a minimum of $256 in fees in the first year for a credit line of $250. Starting in February, however, a new law will cap such fees at 25 percent of a card’s credit line.

In a recent mailing for a preapproved card, First Premier lowers fees to just that limit — $75 in the first year for a credit line of $300. But the new law doesn’t set a cap on interest rates. Hence the 79.9 APR, up from the previous 9.9 percent.

“It’s the highest on the market. It’s the highest we’ve ever seen,” said Anuj Shahani, an analyst with Synovate, a research firm that tracks credit card mailings.

The terms are eyebrow raising, but First Premier targets people with bad credit who likely can’t get approved for cards elsewhere. It’s a group that tends to lean heavily on credit too, meaning they’ll likely incur steep financing charges.

So for a $300 balance, a cardholder would pay $20 a month in interest.

First Premier said the 79.9 APR offer is a test and that it’s too early to tell whether it will be continued, according to an e-mailed statement. To comply with the new law, the bank said it will no longer offer the card that has $256 in first-year fees as of Feb. 21, 2010. However, customers will still be able to use their existing cards.

According to First Premier’s Web site, the credit cards are issued by its sister organization Premier Bankcard. The company, based in Sioux Falls, S.D., says Premier Bankcard is the 10th largest issuer of MasterCard and Visa cards in the country, with more than 3.5 million customers.

In a mailing sent to prospective customers in October with the revamped terms, First Premier writes “…you might have less-than-perfect credit and we’re OK with that.” The letter notes that an online application or phone call is still required, but guarantees a 60-second status confirmation.

The letter also states there are no hidden fees that aren’t disclosed in the attached form. That’s where the 79.9 percent interest rate and $75 annual fee are listed. There’s also $29 penalty if you pay late or go over your credit limit. The credit limit is $300.

The bank did not say how many people were offered the 79.9 APR card, but noted that it needed to “price our product based on the risk associated with this market.”

Even if First Premier doesn’t stick with the 79.9 APR, it will likely hike rates considerably from the current 9.9 percent to offset the lower fees, said Shahani of Synovate.

The revamped terms may not be the only changes; First Premier also appears to be moving away from the riskiest borrowers.

The bank typically mails offers to subprime households, meaning those with credit scores below 700. In the third quarter, however, 84 percent of its offers were sent to subprime households, down from 91 percent the same period last year, according to Synovate.

First Premier could be cleaning up its credit card portfolio since the new regulations will limit its ability to raise interest rates. That could mean First Premier won’t issue cards as liberally to those with bad credit.

As harsh as First Premier’s terms seem, that could be a blow to those who rely on the card, said Odysseas Papadimitriou, CEO of CardHub.com.

“Even when the cost of credit is astronomical, for people in true emergencies, it’s much better than not having access to credit,” said Papadimitriou.

Until Feb. 21, First Premier is still offering its even-higher-fee card online. So the price for credit the bank charges is at least $256 in first-year fees.

Copyright © 2009 The Associated Press. All rights reserved.

How To Improve Your Credit Score

How To Improve Your Credit Score?

It isn’t always easy getting those bills paid and now you know there is damage but wonder what steps you can take to improve your credit score. Even if your credit score is ok, you can only benefit from taking a few steps to raise your credit score. The higher your score, the lower interest you will pay on your loans. If buying a home is in your horizon, you especially want a score as high as you can get it. The very first thing you need to realize is you can improve credit. You should understand you are not alone. In the US, there are over 30 million people with credit problems severe enough that obtaining a loan or a credit card would be very difficult, if not, impossible. You can, however, take some steps to change your score.

What Is Your Credit Score?

The first step you need to take in fixing your credit score is to know what your scores are today. See pull credit report for details on how to pull your credit report and where to pull your credit report from. Now, your score will range from 350-850.  Remember that with some simple steps, you will start to see your credit score rise.

1) Pay down your credit card balances. Your goal here is to reduce your credit card balances so you have are using less than 30% of your available credit.

2) Lightly use your credit cards. It is important to use your cards but use them lightly. Also remember that credit card companies report balances are different times each month and it is rarely right at the due date. So if you rack up a big balance and plan on paying it off, you need to realize that the account may be reported while the balance is high, therefore reducing your credit score.

3) Verify your credit card limits. If your credit card lender is a limit that is lower than you actually have, this may have a negative effect on your score.  If it is incorrect, make a quick call to your lender and they should be able to update your credit limit with their next update to the CRA’s.

4) Get out that old card. The older your credit history is, the better it is for your credit score. So it is very important to not stop using your oldest cards. If you stop using the cards, the card issuer may stop reporting updated information to the credit bureaus. So use the card every few months and then pay it off when the statement arrives.

5) Get some goodwill love. Some people believe this is easily achieved and others have had no success but it is still worth a try. If it works for you-great. If not, you have only wasted a short amount of time. If you have a  good history with the lender, they might agree to delete a late payment from your credit report.  Your goodwill request should be made in writing.  Another solution for accounts that have a serious history of late payments etc is to ask that they be “re-aged.”  If you have an account that is open, your lender may agree to delete any prior delinquencies as long as you make several payments on time.  Be sure to get any agreements in writing.

6) Credit Disputes. When you get your credit report, you should go through it carefully and dispute items that you don’t agree with. I always suggest you mail your dispute certified return receipt. ALWAYS. You can simply dispute using the reason ‘Not Mine’. The older the negative item, the easier it is to get removed. Also a small amount is one that some lenders do not bother taking the time to investigate, therefore they do not respond to the credit bureau within the 30 day time limit and the item must then be removed from your credit report.  If you have credit with a lender that has joined another company, you may have more success as oftentimes the merge creates a mess of their records and they can’t verify the loan.  Credit Disputes can rapidly improve credit.

7) Blast significant errors. Credit scores are calculated off of the information from your credit report so it is important to really check carefully. You should realize that there are many items in your credit history that do not impact your credit score.

Things that do improve your credit score and are worth disputing or correcting:

• Charge-offs,  late payments, collections or items you find on your credit report that are not yours.
• A lower credit limit than you actually have.
• Accounts that show “paid charge off”, “settled,” “paid derogatory,”  or other labels other than “paid as agreed” or “current” if they were paid in full and on time.
• Accounts you listed in a  previous bankruptcy but are still showing as unpaid.
• Items older than 7 years and are showing negative status.

Things you really don’t need to worry about includes:

• Your name is not spelled right. (unless there is a concern for identity theft)
• An old address or an incorrect address.
• Incorrect employer information.
• Account that is closed but is listed as open. (don’t fix this, leave it showing as open as this is better for your score.)

Other actions to beware when you’re trying to improve credit scores:

• Don’t ask a lender to reduce your credit limit.  Lowering your credit limit,  will reduce the available credit that is so important. Remember you need to keep your balances under 30% of your total available credit. This value is worth 30% of your score so it is important to follow this.
• Don’t make a late payment. If you have a bad credit history with a lot of late payments, adding another one isn’t going to hurt your score much but since the goal here is to improve your credit score, you need to avoid any late payments at all. When your score gets in the 700 range, one late payment can lower your score by 100 points!
• Consolidating your accounts. You need to be careful when doing this. Remember you need to keep your total utilization of credit down under 30% so whether you have one card maxed out but all others are open or small balances on several cards, keep that number under 30%.
• Don’t apply for new credit, if you have plenty.  If you do not, you should get an installment loan if you do not have any. Remember to have a variety of loan types.

Improving your credit is easier the lower your score and the older your negative items. Once your score reaches the 700 range, you are in a good zone and probably won’t benefit much but you should always pull your credit reports at least once a year and review it for any errors. Paying attention to the above items can help you Improve Credit right away.