Secured Credit Card

Why a Secured Credit Card

Living in Canada means that you now have to start building your credit score and credit strength. In some cases a secured credit card can help you do this. What does this mean? When ever you go to purchase something that requires you to get a loan, such as a car, or house, the lending institution that is considering your loan application will check to see how strong of a credit score you have. There are two credit reporting agencies in Canada; Equifax and Transunion.

For people who have just arrived to Canada, or for students who have finished college or university and are getting out into the working field, they will need to get their first credit card or line of credit. This is important in two ways. The first is that they will now have a source of credit to purchase what they like, and second, as soon as they start buying items and putting charging it to their credit card, those transactions will be reported to Transunion and Equifax. These credit agencies use specially designed algorithmic formulas to determine your credit score and credit strength (worthiness).

The lending agencies such as chartered banks count on these credit scores to make their final decision as to whether approve your loan or not due to how reliable you are with paying back your debts. The higher your credit score, the better it is.

A secondary service that we have at Trusterra Mortgage is to help individuals to build or rebuild their credits by providing them with a secured credit card.

Before we go further in this post and explain to you about what a secured credit card is, we should point out that there are individuals who have been living in Canada for many years and did in fact have credit cards, but for some reason or another, they ran into financial difficulties and throughout time were not able to pay back their loans, or paid them back very late. Because of these discrepancies their credit scores have been reduced greatly and now the major credit card company’s / banks will not approve them for any credit cards until they can show to the bank again that they have a strong an clean track record of being able to pay back their loans on time.

Now, back to what a secured credit card is. Basically it means that you will have to provide a security deposit to the credit card issuer in order for them to approved you on that security deposits amount to be your credit or spending limit. Therefore, if you provide $500.00 as a security deposit onto the credit card, then your credit limit on the card will be $500.00. You can spend up to this amount but you can never go beyond it. Also, if for some unfortunate reason you can not pay back what is outstanding on the card, the credit card issuer already has your security deposit and they have nothing to lose.

The main purpose of getting a secured credit card is so that you can start building credit activity to your name. As you use the credit card in your day to day purchase transactions, your credit score can start to move up and eventually you will be able to go to a major bank and apply for a unsecured credit card. After which point, you can cancel your secured credit card, get your security deposit back and be on your marry way.

Generally speaking, pretty well everyone who applies for a secured credit card get’s approved.

4 thoughts on “Secured Credit Card

  • January 11, 2013 at 1:35 am

    this is the dumbest most usseels thing don’t even use itit’s riddled with ways to steal your moneyCredit Score??NOPEjust a bunch of obvious information you already knew.shows all the credit cards and loans etc. you have or hadwowbig dealthe website is junk and just redirects you to 3 sites which trick you into buying more things or signing up for more thingsit’s a Scam

    • September 8, 2013 at 3:22 am

      Find a private lenedr. Last time I suggested a resource, someone flagged my answer and Yahoo! removed my response, so I won’t do that again.But private lenedrs will, either as a group or individually.Maybe you even know someone with some money. They can secure their loan with a mortgage on your property. If you don’t repay according to the terms of the mortgage, they can foreclose. That’s the risk you run by borrowing on your house. But I know plenty of investors who’d lend $10,000 or $15,000 on a $75,000 home with no mortgage. The interest rate might be high say 18% or so, but they’d do it.An investor can even fund it out of a self-directed IRA. And with the stock market in free fall right now, plenty of investors are looking for better places to put their money. They’d be glad to lend money at 18% secured by an asset worth 6 times the loan amount.Hope that helps.

  • January 11, 2013 at 5:58 am

    Social lending ruimqreeents are generall lower than bank underwriting and since they all report to bureaus it still increases your credit if you pay on time. Try the following sites.prosper.comzopa.comvirginmoney.comReferences :

    • September 8, 2013 at 2:10 pm

      On compound inteerst loans, the inteerst is calculated based on the daily balance. When you make a payment, it first pays off the inteerst balance and what’s leftover goes toward paying down the principal. The lower the principal gets, the smaller the inteerst charge (in dollars, same percentage). So anytime you pay early or make extra principal-only payments, it reduces the amount of inteerst calculated going forward. Check the terms of the loan because some car loans calculate the total inteerst up front and that amount doesn’t change if you pay early (although an extra payment here and there will mean getting rid of that monthly payment sooner). Also, multiple payments in a month only makes sense if it’s easy for you. If you get paid twice a month, it should be easy to make a payment every time you get a paycheck. If you get paid every two weeks and can afford half a payment each check, even better because that comes out to an extra payment every year. But if you have the money to make the full payment at the beginning of the month, it doesn’t make sense to split it into 2 payments that’s just making it more difficult for yourself.Check to see if your lender accepts partial payments without a fee before making half a payment twice a month.

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