How to Build Credit With a Secured Credit Card (2024)

If you have a bad credit score, then you have undoubtedly encountered situations where your options have been rather limited as a result. One example of this is trying to apply for a credit card and getting rejected simply because your credit score is too low

Fortunately, there is an easy way to fix that and get a credit card at the same time. The answer lies in getting a secured credit card. Essentially, it is a credit card that requires you to deposit some money as collateral. This security deposit provides your card issuer with funds to use in case you are unable to cover your expenses. On the other hand, if you use it responsibly and pay your dues in time, this will reflect positively on your overall credit score, and allow you to increase it.

This is not a magic solution, however, and it will take time before you can inflate your credit score. Some estimates say that it will take 12 to 18 months of careful and responsible usage of the secured credit card, but if you have the patience and discipline, it can be done. We will explain everything in detail and show you what you can do to boost your credit score higher than ever.

What is a secured credit card?

A secured credit card is not that much different from a regular, unsecured credit card. They both have the potential to improve your credit score, they both allow you to spend money upfront and then pay your balance in the following 30 days, and they are both accepted pretty much everywhere these days.

However, there are some important differences between the two. For example, secured credit cards can be granted to people whose credit score is lower than 579, while regular credit cards cannot. To get an unsecured credit card, you need a credit score of 670. Furthermore, secure credit cards are called that because you need to pay a security deposit when you apply for the card. The amount you deposit will then be your credit line. So, if you deposit $1,000, then you will be able to spend $1,000 with your secured credit card.

If your application still gets rejected for some reason, the funds will be returned to you. Alternatively, you will get the money back after you close your secured credit card. Another downside is that secured credit cards have fewer perks and higher interest rates than unsecured ones, not to mention that they may or may not come with an annual fee. However, if your credit score is too low to get an unsecured card, then secured one is your best bet, especially since it can help you raise your credit score. In fact, the ability to do that is pretty much the only thing that makes it better than a regular debit card, which can be obtained by anyone with a bank account.

How can your secured credit card help build your credit score?

If you were wondering whether or not secured credit cards can truly build up your credit score, then the answer is yes. However, this is not something that will happen by default. In other words, it matters how you use the card. Essentially, you need to learn the fundamentals of building good credit and then apply that knowledge to the use of your card.

For example, you need to make sure that you are never late with your payments. Being punctual means being reliable, and that is what the banks and credit bureaus want to see in their users. You should also try to keep your balance low, spending only around 30% of your credit line. If you have some sort of debt, you should also pay it on time and try to pay it off entirely, instead of just letting it lie there.

These kinds of things show that you are financially responsible and reliable, which is then rewarded with an increased credit score. In other words, a secured card is a way to get a taste of what using a credit card is like, and a way to prove that you can be trusted with it. The best way to use your secured credit card is for small, everyday purchases, or for fixed monthly purchases and/or payments.

Then, all you need to do is pay your statement balance in full every month and try to avoid maxing out your credit card as much as you can.

How much can a secured credit card raise your credit score?

We cannot say precisely how much your secured credit card can increase your credit score. However, we can offer some estimates. As mentioned earlier, secured credit cards are meant for people whose credit score is lower than 579. Furthermore, it is known that users can easily upgrade from a secured card to an unsecured one after a while. Meanwhile, to get an unsecured one, you are required to have a credit score of 670 and above.

So, it is likely that the secured credit card can help you raise your credit score by at least 100. You can possibly go even higher than that if you actively work towards the goal of raising your score. In some examples, users have even managed to boost their scores by a significant amount in under six months. However, to achieve this, you need to focus on things like your payment history, credit utilization, credit mix, length of credit history, and new credit.

Be responsible with your spending, punctual with your payments, and do that month after month, and you will not have to wait for long before you start noticing your credit score skyrocket.

What are the best secured credit cards for building credit score?

Finding a secured credit card issuer is not difficult, but not all of them are the same in terms of quality. For example, one crucial requirement in order to improve your credit score is to have your credit card issuer report your financial activities to the three credit bureaus. But, not all potential issuers do this, so if you choose the one that doesn’t offer such reports, then your efforts will not lead to success.

It is best to choose one of the major providers, as they definitely do report your activities, and on top of that — their secured credit cards also come with certain perks and rewards that are quite worth your attention. With that said, we offer a guide to the Best Secured Credit Cards.

When should you upgrade to an unsecured credit card?

If you play your cards right and use your secured credit card to successfully increase your credit score, you will eventually gain the ability to upgrade your secured credit card to an unsecured one. However, you should carefully consider when is the best time to make this switch.

In some cases, your card issuer will make this transition automatically as soon as you become eligible for the unsecured version of the credit card. Discover It Secured Credit Card, for example, allows you to make this switch in as little as 7 months of good payment behavior. After the process is completed, you will get your security deposit back, and your credit line might also grow.

In other cases, you might have to go through the process of closing your security credit card manually, and then receive your deposit, and only apply for an unsecured card after that. But, if your issuer doesn’t start the process automatically or at least makes an offer to switch, how will you know when is the best time to apply for an unsecured card?

Well, we recommend getting at least six months of positive credit behavior, and keep a close eye on your credit score. If you notice that it is moving in the right direction, you can try applying for an unsecured card after six or seven months. If you get rejected, you can then try again after a few more months had passed, and your credit score improved even more.

The best way to move on from secured credit cards is to apply for a bad credit or (also known as a low credit credit card). To learn more visit our guide to the Best Bad Credit Credit Cards.

Final thoughts

The credit score system can be rewarding if you carefully maintain it, or quite limiting if your score is too low. However, there are ways to improve it if you have the discipline and the desire to do so, and getting a secured credit card is the best way to go about it. If you wish to see the list of the best secured credit cards, we have them listed and explained on this page. Check them out, carefully compare their features, requirements, and perks, and then, once you are ready — make your choice, get your card, and start moving your credit score in the right direction.