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Many people wonder how in the world they can increase their credit rating when they have little or no credit and no one will issue them a line of credit to use. It is very difficult to improve your credit worthiness when you are unable to demonstrate your ability to pay your bills on time and use credit responsibly. This is where a secured credit card can help, it can not only teach you how to use credit if you have made mistakes in the past but if used properly will boost your credit rating. The way that a secured credit card works is that you place a deposit into an account in exchange for using a credit card. If you deposit amount is $500 then you will have a credit limit of $500. This money is held for a certain period; some lenders hold it for one year and then can change the card over to an unsecured card. When you use the card it is important to make monthly payments on the balance or better yet pay it off in full each month so that you do not have to pay interest. Just because you have a deposit being held on the account does not mean that you do not have to responsibly pay the bill on time each month. You are trying to prove that you can handle paying your bills on time, so it is pointless to take out a secured credit card if you do not plan on making the payments on time. When searching for a company to sign up with to obtain a secured credit card, be sure to read all of the terms and fine print. Some companies charge high annual fees while others charge no annual fee at all. Do not sign up with a company that requires a large application fee and annual fee, some of which will eat up just about your entire deposit. Another thing to consider is to only open the account with as much as you feel comfortable handling in terms of available credit. If you are just starting back on the road to good money habits then it is wise to start with a lower opening deposit so that you have a smaller limit to have control over. The point here is to establish good financial habits by handing only what you can take on and by paying your bill on time. Before you know it you will be able to have unsecured lines of credit because you will have shown lenders that you can handle money and pay your bills on time, every time. Copyright (c) 2009 Miranda Dotson
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