Brent’s Credit and Debt blog

Often, when you are starting out to build or rebuild credit, you will have a very difficult time getting a credit card. The creditors look at you and see that you are too large a risk to work with. When that happens, you can either keep trying different creditors, or you can try to get a secured credit card or secured loan through your credit union or bank.

There are really two types of credit available. ‘Secured’ credit means that the lender holds something of value so that if you default, they can get their money back. ‘Unsecured’ means that the lender is taking a bigger chance, and will have nothing they can take from you if you default. Because they have less recourse, a lender will typically charge a higher interest rate for an unsecured loan than for a secured loan. This is why a car loan often has a lower interest rate than a credit card; if you stop paying for the car, they take it back.

Getting a secured loan still requires a credit check. When I got mine, Wells Fargo would give me a secured loan, but not a secured credit card. They apparently considered one line of credit enough, and wanted me to prove myself after my bankruptcy. I got a $500.00 secured loan. Here is how that worked:

I game them $500.00 in cash to open a new savings account.

They gave me a secured loan for $500.00, which meant they game me a $500.00 check.

For the next 12 months, about $48.00 per month came out of my checking account to pay off the loan.

At the end of the loan, I got my $500.00 back.

You can see how the process works. Wells Fargo protected themselves by keeping $500.00 of my money, while they gave me a $500.00 loan. It cost them nothing, and in fact they made interest over the next year on my money!

What I ended up with was 12 entries on my credit report that showed on time payments, at all three credit bureaus. My scores went up a LOT (along with other work I was doing), and I ended up coming out ahead of the game.

I ended up with a line of credit for $500.00. What I should have done was go back when it was over to get a $1,000.00 loan, and then a $2,000.00 loan. I should have kept adding money to the loan to get a much higher line of credit open, and I should have kept making payments for as long as the loan was open.

If you are looking for a secured loan or credit card, I would suggest using your bank or credit union as a first stop. If you have a balance in your account, they are likely to work with you. After that, try Orchard bank or Capital One for a secured credit card.

To learn more about how to fix your credit and keep it clean, get my e-book ‘Credit Cleanup’ by clicking the link. ‘Credit Cleanup’ will walk you through how to repair your credit, and tell you how to keep your credit clean.

To get a copy of my FREE e-Book ‘The Top Ten Ways You Can Wreck Your Credit’, just click the link. You will be taken to a page where you can get more information about downloading the e-book. This book tells you what you should avoid doing concerning your credit, and what negative impacts can occur if you treat your credit wrong.