Some people have a poor credit record because they have not paid
outstanding debts in the past or because they have recently filed for
bankruptcy. People with poor credit records are generally unable to get
any credit at all, or if credit is extended, the finance charge is the
high and comes with an "application fee" to obtain the credit.
Some
lenders have begun to offer secured credit cards to those who have bad
marks on their credit record. Under a secured credit arrangement, the
debtor places funds on deposit with the bank or other financial
institution. The lender then allows the debtor to make credit card
purchases from 90% to 150% of the amount placed on deposit - depending
upon the individual circumstances. This arrangement enables people with
poor credit records to have the convenience of having a credit card,
while assuring the lender that there is a source of money from which
the obligation will be paid.
Unfortunately, some of the secured credit card offers are scams. Visit the Federal Trade Commission's
website for more information. If you are using a secured credit card in
order to create a good credit history, you need to make sure that
credit card company reports to a credit reporting bureau. Not all of
them do, and if yours does not, you will waste your effort.
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