Secured Credit Card

A bad credit record will cause difficulties in forming your business. Lenders will be reluctant to grant a credit account. A new business requires a reliable source of available funds. All of this means your company may falter or fail.

A deficient credit record eliminates most opportunities available. There are two choices left. A secured bad debt credit or an unsecured credit card. This article will explain the differences between unsecured and secured those cards and the pros and cons of each.

Secure and Unsecured Credit Card Features

A security deposit at the lender’s institution is required prior to issuance of a secured those card. The amount of the deposit determines the limit of your credit. The lender will usually grant percentage figures of the deposit as your credit limit. This deposit is a payment guarantee to the lender. Your business operations could be in danger if they involve large purchases that amount to greater than the credit limit imposed by your credit deposit. If your business does not make substantial purchases, a secured credit card is recommended. With this type of card, you can also begin improvement of your credit score with confidence.

An unsecured card will grant funds without the need for a security deposit. However, with this freedom, come high interest rates and more severe penalties. If you already have a bad credit rating or have accumulated a large debt load, an unsecured credit card might just add to your woes. Those without self-control or restraint with those cards may find themselves in increased perilous financial straits.

Notwithstanding the risks associated with unsecured cards, many people chose this option because of the less stringent conditions imposed than that of secured cards.

Deciding Which Card is Best

Prior to choosing which type of credit card to apply for, you need to ascertain whether your business has the capability to make payments on schedule to avoid penalties and high interest charges. Both of those card options have attractive and unappealing features. You must assess what your business’s needs are to make an informed decision.

Another point to consider is unsecured credit cards are usually the best option only if your business is required to buy bulk amounts of material in order to manufacture your product. In these instances an unsecured card is justified because of its flexibility. If you choose this route, you must work out whether your business can afford the monthly credit payments on or before the due dates.

In all other circumstances, a secured credit card is a better choice. This will prevent a small business owner from incurring high interest rates and further deteriorating their credit report.

The ultimate decision on whether to choose a secured or unsecured credit rests with the small business owner. The owner will be knowledge about the amounts and types of purchases the business requires for operation.

Regardless of which type of credit card you decide upon, bad credit can only be repaired by responsible financial and credit practices. These practices include keeping your debt at a minimum level and making payments to the lender by the due dates.

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Borrowers with bad credit can get emergency cash by applying for subprime debt instruments such as automobile title loans. Bad credit is usually caused by missed or late payments to creditors that you owe money too. So if you have ever paid your utility bills late, missed a few payments on your credit card or have outstanding medical bills because your insurance didn’t cover a procedure you are likely to have a low score.

Since most lenders report this information to one of the three credit bureaus, Equifax, Experian, and TransUnion they will keep records of your credit history on file for years. Lenders use the information collected by these agencies, to determine the risk in lending to you.

The agencies will lower your rating and lenders will see lending you money as a high-risk investment, if you have a history of missed and late payments on your previous debts or home mortgage. Once you acquire a bad rating, it will be very difficult to get money from traditional lenders.

An automobile equity loan can provide emergency cash for subprime borrowers, but it can also help improve a borrower’s rating if it is paid back on schedule, strictly according to the repayment terms of the agreement.

How To Use an Automobile Equity Loan to Rebuild Credit

The major benefit of taking automobile equity loans is that even if you use your car as collateral, you get to keep and drive your car while repaying the debt. So you will not disrupt your lifestyle, as long as you manage your budget and repay the debt on schedule. To reestablish credit, you need to demonstrate an ability to manage your payments and debts wisely and responsibly.

An automobile equity loan is secured by the borrower’s car equity, which is used as collateral for the loan. Having bad or no credit record does not restrict you from getting an equity loan, but should you default on the payments, your automobile will be seized and sold, in order for the lender to cover the debt and the costs of the process.

An automobile equity loan must be paid back strictly following, the payment schedule in the agreement, in order to boost your rating. The agencies are then notified of your record of payments. And because the bureaus are more focused on your recent payment activity, consistently paying back the debt on time, will help you establish a more positive payment history.

To use an automobile equity loan to reestablish credit, its best to take a short-term loan with a lender that offers competitive interest rates, that way you will be paying the least amount of interest over the term. Some lenders are licensed to operate multiple states including Illinois, Arizona, South Carolina, Oregon, and New Mexico.

Find a reputable lender that offers auto equity loans to those who have bad or no credit and offers flexible terms to help borrowers make payments according to their needs and financial situation. Also make sure the lender charges no pre-payment penalties, so you are not penalized for trying to pay back the loan earlier than the terms of the agreement allow.

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Recently, I was at a 7-Eleven to pick up a cup of coffee. I noticed a local newspaper cover page with the headline “A Bad Credit Report Could Cost You a Job“.

I picked up the newspaper and started reading the article. It talked about, how in order to get a good job these days, more and more employers are pulling credit reports & looking at their candidates Credit Profile.

This is a very dire situation. A person, especially in today’s economy, could have a bad credit report for a number of reasons, being laid off, medical issues, or for many other reasons and now they can’t even get a job. It is really a, what came first, “the chicken or the egg” situation. The statistics that were shown in the newspaper referenced a survey that was done by the Society for Human Resources. They found that in 2009, 60 percent of the employers ran credit checks which are up from 42 percent in comparison to 2006. There was an increase of almost 50 percent.

What would you do if you had bad credit and at the same time no one wanted to hire you because of your bad credit?

I personally think this is discrimination and there should be a law suit filed against employers for discriminating against people because of their credit report.

If the person is qualified to do the job and for whatever reason they have a bad credit, that should not be the deciding factor to hire the employee. One possible option I see is that the employer can have a program for the employees with bad credit, and utilize Financial Education Services companies and organizations to help them fix their bad credit.

There is good news though. WA and HI have banned this practice and there is a bill pending in Congress that would ban the use of credit reports for hiring. However, there is an exception for people in the financial services industry and certain government jobs in the bill.

Being in the financial Industry as a Certified Credit Counselor I would like to suggest certain tips that can help people with bad credit and how they can establish a good credit rating.

Tip #1: Using Your Credit Cards Effectively: When using your Credit Cards keep in mind that it is money that you owe someone. The credit card companies have allowed you to use their money to be able to buy the things you want and need. However when credit cards are used effectively they can actually work in your favor. Most Credit Cards offer reward programs when you use the card. To get the most rewards, the key is to pay off your credit card balance every month.

Tip #2: Use only 27 percent of the available credit limit: This is important. Anytime your balance on the credit card goes above 27 percent it can impact your credit negatively. So for instance if you have a credit limit of $5,000.00 make sure to use only $1,400.00 maximum.

Tip #3: Never close any Credit Cards: This is very important. Your length of credit history and the total available credit limit is a big factor in the calculation of the credit score. Every time you close an account it is going to reduce your available credit limit and if you have had this card for a long time it will also wipe out the history you have established for all those years.

Tip #4: Pay all your bills on or before the due date: This factor alone counts for 35% for the calculation of your credit score. This is what establishes your credibility which as you know, is very important in life as well. This also reflects on your personal life. One of the reasons more employers have started looking at credit report before they hire an employee is this, to see how the employee manages things in their life. If a person can manage things in life well, they will be responsible at the job as well.

Tip #5: Have a plan: If you currently have bad credit and do not know where to start then I will share with you a simple and an effective plan. First if you don’t have a credit card, get one. A good number of credit cards to have is 2, in addition to a home mortgage and a car loan. There are two different types of credit cards that you can get started with, one is a secured credit card and other is unsecured credit card. The secured credit card is where a lender or a bank will take a deposit for the amount and then issue you a credit card, usually for less than the amount of the deposit. I personally would only go to banks that will give a credit limit equal to the amount of your deposit.

The other way is to apply for a credit card that works with a direct deposit from your employer. The way that works is when you have your salary directly deposited to the institution they will issue a credit card, instead of a debit card. Every time you use the credit card, even though the money is being taken out of your account, it is reflected as a credit transaction and it is reported to the credit bureaus and reflects on your credit report. It is a good way to get started. 

One important thing to remember, which is unfortunate, is that a lot of businesses make money from people who are not able to manage their finances well. Think about it, who pays the most and at the same time earns or keeps the least. If you have bad credit, you are going to pay a higher interest rates than people who have excellent credit. When you are suffering with bad credit you may have to use the services of a company that can help you establish your credit, you may have to file a bankruptcy, do a loan modifications, pay higher interest rate on car loans, insurance rates, mortgage interests etc. You see where I am heading; life is going to cost you more.

I hope all this information was helpful and useful to you at the same time. 

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