Money Girl answers 8 frequently asked questions about credit cards and gives tips to maintain and build credit.
Credit Card Question #3: Keith asks, “About 4 years ago I got a $200 secured credit card to help rebuild my credit, and now my credit is great! But the card has a $10 monthly fee and I don't use it very often. What would happen to my credit if I cancel the card?”
Answer: Once you’ve used a secured credit card to build your credit, it’s time to apply for a regular credit card. Some secured accounts may give you the option to convert to a regular, unsecured credit card after a period of time.
If you can’t get a regular, no-fee card from your current card company, I recommend that you apply for a new one. I’d wait and cancel your secured card after you get a regular one to replace it.
Credit Card Question #4: Frank asks, “My ultimate goal is to become a homeowner. Right now, I’m an authorized user on someone else’s credit card. Would having another card in my name help me build credit?”
Answer: Being an authorized user on someone else’s credit card means that you have permission to use it, but aren’t responsible for any of the debt. It’s a great first step in establishing credit, but only if the account history is reported on your credit report and the card owner makes payments on time.
As I’ve mentioned, you must have a history of positive information in your credit reports to build credit. So, I recommend that you get an additional credit card in your own name as soon as possible. If your credit isn’t good enough to qualify for a regular card, apply for one of the secured credit cards that I recommend in this article.
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Credit Card Question #5: Steve asks, “How can I find out if a particular secured credit card will report my payment information to the credit bureaus?”
Answer: Any secured credit card that reports your payment information to the nationwide credit agencies should advertise that benefit upfront, since it’s a competitive advantage. If you don’t see their reporting policy, you could contact the card company to find out before you apply.