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Can you build your credit using a Credit Card? – APF Credit Cards

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Advance Personal Finance

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Using a Credit Card to help build your Credit

People look at credits cards as for how you can get further into debt. Debt can hurt your credit score to where you can’t buy a car or get an approval on a loan that you need. However, there are ways that you can actually use credit cards and build up your credit at the same time.

For example, the most common way of doing this is to obtain what’s known as a secured credit card. This special type of credit card allows you to place money in a security deposit. This is used as collateral should you default on your monthly payments. Security deposits will let card lenders see that even if you have a poor credit history or even credit that has been otherwise damaged, you will still pay them back.

Monthly Payments are determined by three things:

  1. Your income
  2. Whether or not you have the ability to actually make monthly payments
  3. The amount of money you place into your security deposit (ex: if you put $500 into a security deposit, then your credit line will be that same amount)

If you sign up and get approved for a secured credit card, there are a few things that you will need to keep in mind in regards to using it.

First of all, using a secured credit card is exactly the same as using a normal credit card. That means you can use them to make purchases, pay household bills, etc.

Secondly, while these kinds of credit cards can help build your credit or even re-establish it, the card issuer reserves the right to keep your entire security deposit if you fail to make the necessary monthly payments. Therefore, as with normal credit cards, making monthly payments is absolutely crucial.

Finally, you may eventually qualify to receive an unsecured credit card; however, you must successfully pass a review held by the issuer of the card first. Passing this review will show the lenders that you are responsible financially. This will lead to positive reports being sent to various credit reporting agencies. In addition, you may also be entitled to a refund of your entire security deposit. That will also show you to become qualified to receive lower interest rates on multiple things. That is including cars and home mortgages.


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