People with the poorest credit need to bring up their credit score in order to take out loans for the important things in life like a house, education, car, or starting a business. If you find yourself in this same situation, all hope is not lost. Secured Credit Cards are made to help people dig their ways out of holes that bad borrowing practices have dug for them. If your credit score is just low from the get-go, Secured Cards can still help you.
Many of these kinds of cards are offered to anyone, regardless of their score, from fair, to bad, to no none at all. How can anyone afford to loan money to someone who has proven themselves unworthy to pay back officially borrowed money? Well, for the most part, this is done by giving small amounts of available credit at a time, with a form of collateral called a security deposit. Like the security deposit for a rental property, you will give the issuer money ahead of time that they can keep only if you can't make your payments. This is the security implied by being called a “secured” credit card. So, the approval process for a card like this is a lot simpler since you usually won't need to have a credit check in order to get your card.
The money you can be approved for is usually going to be quite small, somewhere in the neighborhood of a few hundred dollars. With such a small amount of money being lent, it is assumed that you will be able to pay your debt back sufficiently and timely enough to restore your credit score to a more reasonable and helpful rate. With a better credit score, you can borrow more, and finally have the means to get major loans. The main reason all of this is possible is that the small amount of money you are borrowing and paying on gets reported to a major credit bureau. When it gets reported to any of the major credit bureaus that you are paying on time, your credit score will inch its way back to a favorable state. Just make sure if you get a secured card that you are getting one that actually does report to all three, and not just one.
Most secured cards require you to only make purchases through certain websites, or approved stores. Having these limitations helps to reduce impulse spending and other dangerous credit practices. If you really want to repair your credit, it will take the discipline and the restrictions that come with Secured Credit Cards. Don't be tempted into getting one of these kinds of cards unless you can be sure that you will make payments in full and on time. If not, you may ruin your credit beyond repair.