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Saturday, February 14, 2009

Improve Your Credit Score, No Matter What Your Situation!

By Linda Seamore

In this day and age where most people have easy access to a consumer credit, Americans are finding themselves sinking deeper and deeper into debt. Racking up a mere $10,000 in debt is now easy and all too common.

Due to the fact that consumer debt is at an all-time high, more and more people want to be informed of helpful and trusted tips to rebuild credit history. Most of the time, when people hear the word "budget," they think of having to starve themselves and an almost non-existent social life. Lucky for you, having an effective plan for managing your debt and of course maintaining healthy personal credit and credit scores, by using certain types of credit cards, will definitely assist with meeting your financial goals.

Not only are these credit cards beneficial, they also provide for some consumers the only way out, especially if they've been denied a bank account or traditional credit card. Given that it takes two incomes in most households and a great majority of men and women both are in the workforce these days, there is hardly any time to prepare budgets and investigate ways to increase their credit scores.

In order to get on the path to financial success, you must make your first step! Why don't we take the first step and weigh both the secured and pre-paid credit cards, and the advantages and disadvantages of each.

Secured Credit Cards

Pros - Opening a secured credit card account is a simple and affordable way to start building your credit. Secured credit cards will also help you improve and rebuild damaged credit. These cards are used exactly like a standard run of the mill credit cards you are familiar with.

Cons - One of the major drawbacks to this type of card is that to secure the card you must put down a $200 to $250 deposit with your application. For many this may be a tuff requirement. These cards also tend to have much higher interest rates (15% or higher) and additional charges such as an annual fee (usually around $50). Despite these drawbacks, for many looking to rebuild their credit, these cards make sense.

2. Pre-Paid Credit Cards

Advantages- Pre-Paid Credit Cards are a very useful tool, because they give you all of the flexibility and freedom of using your own money. They look, feel, and spend just like a real credit card; they can be used in any occasion that you would use a regular credit card. With these cards, you determine how much money you would like in the account by "loading" money, instead of the company offering you a credit limit based on your financial history. Almost everyone can be approved for this type of card, and yes....even if you've had a bad credit past.

Negatives-This may not be the best choice if you're looking to establish or rebuild your credit. Pre-Paid cards may not report your repayment history to the credit bureaus. If the company doesn't report back on your account, this type of card, unfortunately, will not improve your credit. If you look at all of your options available, and compare cards based on your needs, you'll be just fine.

Note that pre-paid credit cards may not be allowed in some situations. When you rent a car or book a hotel, some places will not allow use of a pre-paid card to hold car rentals or rooms. Be safe and call ahead of time to ask about the company's policy on pre-paid cards before you're halfway through the process.

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