There are two types of credit cards available to most people: secured credit cards and unsecured ones. Most people don’t like the sound of the word “unsecured,” but that doesn’t mean it’s a bad thing. After all, an unsecured credit card or unsecured debt just means that you don’t have to put down a deposit to open the account. Sometimes, unsecured debt is a good thing, because it makes it a little easier to open an account and build your credit by making your payments on time and in full. However, you have to be careful. Sometimes unsecured debts come along with high interest rates and annual fees.
In contrast, a secured credit card means you put down a small deposit, typically $100 or $200, to open the account. Other than that, a secured card simply functions as a regular old credit card, which is what makes it an effective credit-building tool after a debt settlement process.
Make sure not to carry a balance month over month on the card, as that will accrue interest over time. After debt settlement, you’ll probably see a dip in your credit report and you might find it difficult to open accounts. A secured account is a good way to prove your creditworthiness and ability to maintain healthy credit growth over time.
Curious about secured and unsecured debt and how they affect your credit score after major events like a debt settlement? Contact Cain and Daniels to talk about your situation today to see what the best move may be for you.