Make sure it's a secured card, not prepaid card.

Posted by mk_378 (164.106.127.173) on December 16, 2003 at 19:11:59:

In Reply to: Re: How can I change this score? posted by CAK on December 16, 2003 at 17:39:54:

"Prepaid" or "stored value" cards don't report to CRA's because there's no credit involved. They're like the "debit card" or "check card" that banks give out with a checking account. They don't check your credit before issuing them, but having one won't improve your credit either.

You want a "secured" credit card. It's exactly like a standard credit card except you have to deposit money up front at the bank. No one can touch this money unless you default on the card. Then they take it and use it to pay off the balance. If you keep the card in good standing and eventually close it out, you get the money back, often with interest. Just about anyone who can put up the $300 or so will be approved.

Some secured cards report to CRA's as if they were unsecured. That's even better for your score, but not absolutely essential. When comparing cards, look for a low annual fee, NO other monthly fees, and NO "application" or "account opening" fees. Remember you're about to borrow your own money so there's no reason to pay high fees for it. The card's APR is a distant secondary consideration compared to it's fee structure. With a low balance, APR-based finance charges will be small. If the card has a grace period, avoid the APR altogether by paying in full every month.

Don't rush into a subprime car loan to "build credit." It's horribly expensive compared to dinking around with low-limit credit cards. There is a significant risk that something will happen and you won't be able to afford it, then get a fresh repo on your record. Wait until the repo is off your report and you have perfect reports from the credit cards before trying to finance anything big.

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