Bankruptcy Using Credit Cards
How do Secured Credit Cards work?
I have no credit. My parents are in the middle of filing bankruptcy (because of credit cards). I decided that I will never use a credit card but realized that is not good because I realized how important good credit is. I plan to get a car (which I heard helps build credit if you finance it).
I keep reading about secured credit cards. HERE IS WHAT I KNOW:
-You put a deposit down (say $500) and if you default (does that mean you miss a payment?) it comes out of that deposit
-You cannot go over your deposit limit
Also I keep reading people saying to not go over 10% or 15% balance on the card. What does that mean? (Does it mean to not use the card for more than 10-15% of your deposit? So for example a $500 deposit would that mean not to go over $50-$75 each month in charges?)
Yes, you pay a deposit which is held as collateral against the line of credit. I recommend you start with a small limt — $200 to $300. Use the card for small purchases and pay in full every month. This builds good payment history. In about a year, you should be able to get a regular credit card or conver the secured card to a regular account.
Do not make yourself crazy worrying about usage percentage. Just use the card and don’t go over your limit. As long as you pay in full every month the usage percentage really has little impact on your score.
When shopping for a secured card, start at your bank. Be very leary of online offers. Make sure you read ALL the terms. Some of them have all sorts of fees which you want to avoid.
Dealing with Credit Card Debt
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