Secured Credit Card.
Secured Credit Card
A secured credit card is a tool that is meant to help you build or rebuild your credit. In order for you to become a candidate to be granted credit, you must have credit in Canada. Most importantly, healthy credit will enable you access to more borrowing options and usually always at low rates.
If you are seeking a mortgage, a credit card, a car loan, a business loan or even a line of credit, your credit will be analyzed. This is why it is very important to establish and maintain healthy credit.
How Does it Work?
Similar to how your mortgage is registered again real estate, a secured card card is backed by a cash deposit. In other words, the amount that you pledge towards the secured credit card will serve as the secured credit card limit.
A secured credit card reports to credit reporting agencies such as Equifax and Transunion. Therefore, when you use your secured credit card responsibly, you might be able to improve your credit. You will make your daily purchases on your secured credit card similar to how you would use your regular credit card. Most importantly, you want to maintain a reasonable balance-to-limit ratio as we discussed here. That is the point of your secured credit card – you must be strategic and practise healthy credit behaviour. You want to ensure that you pay your balance in full each and every billing cycle, otherwise, you could potentially worsen your credit. Keep in mind that you will receive your deposit back once you close your secured credit card.
Typical Reasons for a Secured Credit Card
- You are new to Canada and wishing to establish credit
- You have discharged from consumer proposal or bankruptcy and need to re-establish your credit
- You must use an additional credit facility to show thicker credit history and satisfactory credit utilization
You must keep in mind that traditional lenders will still entertain your mortgage, however, not so fast. You are responsible to show to your mortgage lender that you have re-established your credit after discharging from consumer proposal or bankruptcy. In most cases, there is a minimum 2 year period, where you show perfect payment history for a minimum of 2 credit facilities, with a minimum limit of $2,000.
Sure, there are more lenient funding sources, however, it’s best to position yourself to be eligible for the lowest financing rates available. These alternative mortgage options might be costlier, however, they enable solutions.
- We recently had 2 clients with Equifax scores of 544 and 604, respectively
- We helped them receive a secured credit, each
- No other credit facilities were opened during the 12 months
- All payments and obligations were paid as agreed
- Over 12 months, their credit scores increased to 661 and 694, respectively
On a side note, we’ve been able to provide clients home with a home equity loan while they were in the middle of a consumer proposal.
Simply indicate your availability in the contact form below, and we’ll provide you with more information on how to apply for your secured credit card.