No Credit? No Problem!

These days, having good credit is far more important than simply having the ability to borrow money. Credit comes into play when you apply for a job or try to rent an apartment. Even auto insurance can be determined by your credit rating.

So, what should you do if you’re trying to establish or rebuild your credit?

Well, before you dial that 1-800 credit repair number you saw on late-night TV, beware. "People should definitely avoid agencies that say they will rebuild your credit," warns Jerrold Mundis, author of How to Get Out of Debt, Stay Out of Debt, and Live Prosperously (Bantam; $10.95). "Ninety-five percent of these agencies are scams — they can’t or won’t do it." The good and bad news is that rebuilding your credit is largely up to you.

A secured credit card may be the way to go. Getting a secured credit card is as simple as making a cash deposit that becomes your credit line. Some banks allow you to add to the deposit while others will reward you for making timely payments by adding to your credit line. Remember, you are trying to rebuild new credit, not take on more debt — so beware of temptation. "Only use the card for purchases you can afford to pay in full," says financial adviser Pierre Dunagan of the Dunagan Group in Chicago. "This will help you establish credit without incurring debt."

Don’t miss a single payment. "These days, credit records are so sensitive that a single late payment could cause you to be denied future credit or charged a 5% fee," warns Mundis. After a year of on-time payments, ask your secured credit card issuer to convert your card into a nonsecured card and ask for your deposit back.

Before you check out our handy sidebar to see which secured card meets your needs, here are a few things to be aware of when applying for a card:

Watch out for the annual fees. They carry higher interest rates and there isn’t a grace period on advances, which means interest on your purchases accrues immediately.

Look for a card that doesn’t charge an application fee or any other processing fees to open your account because they may be applied against your line of credit.

Don’t apply for a card that doesn’t report your timely payments to the three major credit card bureaus. Remember, you’re trying to build a credit trail.

Top 10 secured credit cards with lowest fees and minimal balances



Card Class

Purchase APR

Annual Fee

Fees & Conditions

Amalgamated Bank of Chicago 800-723-0303 Gold 9.25% $50 No application fee. $5,000 — $15,000 deposit; line of credit same as deposit.
Amalgamated Bank of Chicago 800-723-0303 Standard 12.75% $50 No application fee. $500 —