Got Bad Credit? This One Simple Move Could Change Your Life

If you have bad credit, or do not have enough established credit history, your low credit score can hurt your life in many ways that go beyond your ability to borrow money. Having bad credit can make it harder to get approved to rent an apartment, and can lead to being rejected for job opportunities.

But the good news is: people with bad credit still have options and can take action to improve their personal finances. If you're going through a hard time financially, if you've recently declared bankruptcy, or if you're getting declined for credit applications, your top priority should be to improve your credit score.

One of the most effective ways to improve your credit score might be getting a secured credit card. Let's look at how this one simple move can improve your financial life for years to come.

Secured credit cards: Building credit without the typical risks

With a typical credit card, a bank issues you a card and a credit limit based on your credit score, your income, and the bank's belief and trust in your ability to repay. But people with bad credit often cannot get approved for the usual credit cards.

Here's where secured credit cards can help: Approval for these cards isn't based on your credit score. Instead, you need to put down a cash deposit upfront, and then that amount of money becomes your credit limit for how much you can spend on the card.

If you have struggled with credit card debt in the past, secured credit cards let you manage your spending in a controlled way. With a secured credit card, you still need to make payments on time and manage your spending responsibly. Secured credit cards still charge interest (with high APRs) if you do not pay off your balance each month. But you likely won't be able to rack up the same amount of high-interest debt in the same way as a typical credit card -- secured credit cards can help you reduce your risk of taking on too much debt.

Secured credit cards can improve your credit score

If you've gone through financial problems, have made late payments, or have other bad marks on your credit report, secured credit cards can help you get a fresh start. By making payments on time and managing your secured credit card responsibly, you can build credit history. Your payment history is the biggest part of your FICO® Score, and secured credit cards give you a chance to show lenders that you're a trustworthy borrower.

Some of the best secured credit cards, like the Discover it® Secured Credit Card, will even let you "graduate" to a regular credit card after a few months -- if you qualify based on your account history.

Secured credit cards can reduce your borrowing costs

Using secured credit cards to make purchases and pay them off monthly can help you improve your credit score and reduce your borrowing costs. If you build better credit, you can get lower-interest loans on everything from auto loans to home mortgages. Having a higher credit score can also make it easier for you to qualify for balance transfer credit cards to pay off high-interest debt faster, or 0% APR credit cards to pay for big purchases with no interest costs.

Just the simple step of applying for a secured credit card could help you get to a better future where you save hundreds of dollars per month on interest and fees, or tens of thousands of dollars for the rest of your life.

Bottom line

Don't feel bad if you have gone through a bankruptcy or been denied a credit card or loan in the past. You have a special tool available that can help improve your credit: secured credit cards. Improve your credit score, and other parts of your financial life might become easier, too.