If you are someone who has not been able to establish a credit history, yet you may feel as though you will never be able to be approved for a credit card. This is not an uncommon feeling since lenders do want to know how you manage your credit in the past before they extend you a line of credit. However, if you have not had credit you can get a credit card with no credit check. Your solution is a secured credit card.
Secured Credit Cards Explained
Secured credit cards work similar like traditional credit cards except you have to make a cash deposit to secure the card. The credit limit that you have will be the same as the amount of the deposit that you made. However, this allows the bank to lower their risk in the event that you do not pay the bill yet at the same time, you are establishing your credit to be able to get an unsecured credit card in the future. Usually, you can make a deposit as small as $200 and as large as $2000.
Key Things to Keep in Mind When Getting a Secured Credit Card
If you are getting a secured credit card to establish a line of credit you want to keep in mind that usually these credit cards have higher interest rates and annual fees. Therefore, this is not a credit card that you want to have long term. Once your credit has been established, it is recommended that you get a traditional credit card so your terms and rates will be better. Furthermore, not all secured credit cards report to all of the credit agencies. Therefore, before getting a credit card you want to make sure they report to all three. Your credit will only improve if your credit activity is available on your credit report.
Tip: Some people have a hard time finding a bank account with no credit checks. Banks like Union Bank and FSNB do not check credit. You can get a new account fairly easy.
How to Use Your Secured Card Responsibly
Since credit cards can make or break your credit, it is important that you use your secured credit card responsibly. You will want to keep the following tips in mind.
- Always pay your bill on time every time
- Keep your balance as low as possible
If you were looking to get a credit card without a credit check to help your credit score getting a secured credit card would be the ideal solution for you. Once you obtain it and your credit score starts improving you will then be able to upgrade to a traditional credit card.