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Topics addressed on October 13, 2010:
Secured credit card could help build a positive credit history
Will a secured credit card establish and built a credit score for my 19-year-old son?
A secured credit card can be a good first step in establishing a positive credit history if the lender reports the account to the national credit reporting companies. Secured accounts are not always reported.
If your lender does not report the account, it would not appear on your credit report or result in establishing a credit history. Similarly, some credit scoring systems may not include secured accounts in the calculation, so they may not help improve credit scores.
However, that doesn’t mean a secured account can’t lead to both establishing a good credit history and improved credit scores. In many instances, a secured account opens the door to obtaining a traditional credit account.
Often, if you manage the secured account well, your lender will, in time, agree to convert it to a regular, unsecured account. The unsecured account would then be reported and would be included in credit score calculations.
So, if you can’t qualify for a traditional account because you lack a credit history, asking your lender to open a secured account can be a good way to demonstrate you can manage your finances, which can lead to establishing a credit history and building strong credit scores, although it might not be right away.
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- The "Ask Experian" team