Certificate of Deposit

Question: How do Certificate of Deposits (CD’s) actually work? And is it true they can help your credit?

I heard that taking out a CD and then getting a secure loan on one of them and paying it off will build my credit score….??? is that true and is that really how it works or was I told wrong? also, I have bad credit and im trying to fix it and build it up so if anyone has any suggestions I would love for you to share your opinions. thanks very much!

Answer: CD’s pay you a fixed amount of interest over a certain period of time. The time line can be anywhere from 6 months to 10 years or more. It really depends on the bank and the amount of the deposit. Generally larger deposits and longer time lines pay higher interest rates. Becareful though there is often fee’s for taking money out before the CD matures or going below a certain amount of money. If you are considering a CD your banker can tell you more about it. These are investments however and will not help you out credit wise. Some banks may use a CD as collateral for a secured loan, though generally secured loans have some other type collateral or cash up front that they require. Again a loan officer at a bank could best help you out with this.
Hope some of this helps.