Opening a new credit card is a smart way to build or improve your credit score, as long as you’re fiscally responsible. (CNBC.com)
While there are thousands of credit cards available, most require some sort of credit history in order to qualify. This can make it hard for people with less than stellar credit (typically, a credit score below 580), or no credit at all, to qualify for a card.
Secured credit cards are one of your best chances at qualifying for credit. They’re similar to traditional cards (they extend credit, charge interest and may offer rewards) but require you to make a deposit (typically $200) in order to access a credit limit. Whatever amount of money you deposit becomes your credit limit. If you want a higher credit limit, you’ll need to deposit more money.
Your security deposit acts as collateral if you fail to make payments. But don’t worry about losing that money; your deposit is refundable if you pay your balance in full and close your account.
In addition to secured cards, there are some other credit card options for people with no credit or poor credit who don’t want to — or are unable to — put down a deposit. While a credit card can be an easy way to build a strong credit history, you need to make sure you use it responsibly. After you open a credit card, make sure you spend within your means and pay your balance on time and in full.
Keep reading at CNBC.com to see their picks for the top credit cards for those looking to improve their credit.