- Requires upfront payment
- May charge high annual fees
- Fees are taken from your deposit, reducing your available credit
- Low credit limit
- No benefits or rewards
6. Maintain good use of credit
Once you have an active credit card, it’s tempting to use it as much as your credit limit allows, but it will actually take you away from a good credit score. There is good and bad use of credit, even if you have a clean payment history. In fact, the use of credit is the second most important credit score factor after payment history.
A credit utilization rate divides the current revolving credit debt by your maximum credit limit. The resulting number, expressed as a percentage, reflects your credit utilization rate, which is the amount of credit you use versus the amount of credit you have.
Imagine you have a credit card with a limit of $ 8,950 and the current balance is $ 2,332. $ 2,332 divided by $ 8,950 is 0.26, which means your credit utilization rate is 26%.
Good credit use comes down to one rule: don’t use more than 30% of your available credit. If a secured credit card has a limit of $ 300, that means the current balance should not exceed $ 90 at any one time.