Consumer Car Buying Advice Blog

Using a secured credit card can help your credit repair during poor credit auto loans

Credit repair tools

If you’re currently using a bad credit car loan you can raise your credit scores even more with a secured credit card.

At Auto Credit Express, we think you should know this because we’ve been working in bad credit auto sales for more than twenty years. During that time, we’ve helped hundreds of buyers get approved auto loans.

We also can show you how to avoid a tote the note dealer (outside our retail areas you can fill out our online car loans bad credit application to find the right dealer near them) and you can learn about the loan process (to prevent repossession).

Revolving credit

There are basically two types of credit you can apply for – installment and revolving credit.

Installment credit

Installment credit is when you sign a contract to pay a fixed amount for a fixed term (such as $300 per month for 48 months). A car loan is an example of installment credit.

Revolving credit

With revolving credit there is no fixed monthly payment other than a minimum due based on the balance. When you make the minimum payment the lender will allow you to carry over (revolve) the balance while charging you interest on it. A credit card is an example of revolving credit.

There are also two basic types of credit cards.

Secured credit card

A secured card is the easiest type to get even for people that have no credit history. The lender will require that you set up a savings account with your credit limit on the card being the balance you have in the account.

A secured credit card eliminates the need to carry around cash, since you can use it for purchases. The cash is withdrawn from your savings account to cover those purchases. The advantages over a traditional debit card are that the Visa or MasterCard logo means you can use it at most businesses and, unlike a debit card, the lender will report your monthly payments to the credit bureaus, helping you to either establish or reestablish revolving credit.

Since many lenders offer these cards, you should shop around for the best deal that includes the lowest monthly interest rate plus the lowest fees. Lenders often charge set-up, program and monthly servicing fees on top of an annual fee, so add these up to be sure you’re getting the best deal.

Finally, look for a lender that will convert a secured card to an unsecured card after a certain period of timely payments.

Unsecured credit card

An unsecured credit card requires no savings account. As with a secured card, you should shop around to get the best deal on interest rates as well as monthly and yearly fees.

Your credit scores

You’ll notice a slight credit score drop after applying for a card, so limit the number you apply for and accept. To maximize your FICO scores, either pay off the balance every month or keep it below 30% of your credit limit. On-time payments will raise your credit scores, but balances over 30% tend to drop them slightly and raise flags with the credit bureaus.

As we see it

Using a credit card and keeping your account balances under control will allow you to reestablish revolving credit while raising your credit scores – just as a bad credit auto loan can reestablish your installment auto credit.

At Auto Credit Express we specialize in placing customers with poor credit with dealers that can help them. These dealers work with a broad spectrum of lenders to ensure you have your best chance of getting approved auto loans.

So if you are serious about getting your car credit back on track, you can begin by filling out our bad credit car loan application now.

Tags: approved auto loans, Bad Credit, credit card, secured credit card

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