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Why Keep a Secured Credit Card Even After Improving Your Credit?
At O1ne Mortgage, we prioritize consumer credit and finance education. While you may be eager to move on to an unsecured card after improving your credit, there are several compelling reasons to keep your secured credit card active. Here are five key benefits:
1. Continue Building Credit
A secured card can help you build your credit indefinitely, as long as you use it responsibly. By making timely payments and keeping your credit utilization low, you can positively impact your credit score. Payment history and credit utilization make up a significant portion of your FICO score, so maintaining good habits with your secured card can be beneficial.
2. Avoid Hurting Your Credit From an Account Closure
Closing a credit card can negatively affect your credit score by reducing your overall credit limit and increasing your credit utilization ratio. Instead of closing your secured card, consider using it for small, recurring purchases to keep it active and maintain your credit history.
3. Use as a Budgeting Tool
If you have a new unsecured card, you can use your old secured card as a budgeting tool. For instance, allocate specific expenses like entertainment and dining out to your secured card. This can help you manage your spending and ensure you stay within your budget.
4. Option to Convert It to an Unsecured Card
Some secured cards offer the option to convert to an unsecured card after a period of responsible use. This can provide you with a higher credit limit and allow you to retain any rewards you’ve earned. A higher credit limit can also help reduce your credit utilization ratio, which is beneficial for your credit score.
5. Can Limit Your Temptation to Spend
Secured cards often have lower credit limits, which can help curb your spending and prevent you from accumulating large amounts of debt. This can be particularly useful if you find credit cards to be a spending temptation but still want the convenience and safety they offer for online purchases and automated payments.
Secured cards can be a valuable tool for building or rebuilding your credit. By strategically using your secured card, you can continue to benefit from it even after your credit has improved. For any mortgage-related needs, feel free to call O1ne Mortgage at 213-732-3074. We’re here to help you make the best financial decisions.
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