Can I Get a Secured Credit Card With a 500 Credit Score?

Whether you're just starting to build your credit or you have a bad credit score, such as a 500 credit score, you might be wondering whether you can get a secured credit card with a 500 credit score? We will answer this question in much detail below.

Can I Get a Secured Credit Card With a 500 Credit Score?

Yes, you may be able to get a secured credit card with a 500 credit score because card issuers know that consumers with bad credit still need a credit card, as such, they offer consumers the ability to obtain secured credit cards where the risk to the card issuer is reduced by having you place a security deposit with the card issuer.

Secured credit cards are different from regular unsecured credit cards in that to obtain a secured credit card, you must place a deposit with the card issuer. The security deposit then determines your credit limit.

For example, if you place a $700 security deposit, the card issuer will give you a credit card with a $700 credit limit. Usually, card issuers will give you back your security within 12 to 18 months if you use your secured credit card responsibly and make your payments on time.

However, if you default on making payments on your secured credit card or you want to close the account while the card has a balance on it, the card issuer will use the security deposit to pay off your outstanding balance. The remainder of the security deposit, if any, will be returned to you.

If you have a 500 credit score, getting an unsecured credit card will be very difficult because your credit score is in the bad category. Lenders will see you as extremely risky to lend money to. As such, if you have a 500 credit score, your best option is to apply for and obtain a secured credit card. By paying a deposit, you represent a lower risk to the card issuer, and so they are more likely to allow you to borrow money from them.

When it comes to building and improving your credit, a secured credit card will allow you to build your credit just as would a regular unsecured credit card. This is so because your secured account status is reported to the credit reporting bureaus, so making your payments on time will help your credit score.

Can You Improve Your 500 Credit Score With a Secured Credit Card?

Absolutely, yes. Opening a secured credit card is one of the best ways for those who do not have credit and those who have bad credit to improve their credit. This is so because a secured credit card works the same way as does a regular unsecured credit card.

So, if you open a secured credit card and you make your payments on time, this information will be reported to the credit reporting bureaus, improving your credit score.

Those with no credit will be able to improve their credit score much more quickly than someone with bad credit. This is so because a person with no credit does not have any negative information on his credit report to drag down his or her credit score.

Nevertheless, secured credit cards are a great tool for consumers who want to build their credit from scratch or improve their bad credit.

So, if you want to improve your 500 credit score and you've been denied a regular unsecured credit card, you should explore the option of applying for a secured credit card to improve your credit.

How to Get a Secured Credit Card?

To get a secured credit card, you should first find a secured credit card, such as the Bank of America Secured Visa Credit Card or the Discover It Secured Credit Card. You should then submit your credit application online or by visiting one of the card issuers branches.

When you go to the secured credit card application, you will have to provide personal information, such as your name, date of birth, social security number, employment status, and income. Additionally, you will have to provide a security deposit to obtain the card.

Providing a security deposit is done by either giving the card issuer cash if you're applying in person or by providing your checking account information if you're applying online.

If you're approved, your security deposit will be deducted from your checking account, and your secured credit card will be mailed to you.

What Are the Best Secured Credit Cards For Someone With a 500 Credit Score?

If you have a 500 credit score, here are some of the best secured credit cards that you can apply for today.

  • Bank of America Secured Visa Credit Card - The Bank of America Secured Visa Credit Card is a great option for someone who wants a simple and straightforward credit card. This card comes with a $0 annual fee and you can deposit a security deposit of up to $4,900 for a $4,900 credit limit. The minimum deposit amount is $300 for a $300 credit limit. Also, the card comes with the ability to make contactless payments by tapping your credit card to pay. Unfortunately, this card does not come with any rewards, making it great for someone who wants a straightforward secured credit card with no annual fee.
  • Discover It Secured Credit Card - The Discover It Secured Credit Card is a great secured credit card that comes with a $0 annual fee. The great thing about this credit card is that it's one of the few secured cards that offer rewards. You can earn 1% cashback on all purchases, and 2% cashback on restaurant and gas station purchases. If you're approved for this credit card, you will be granted access to check your credit score for free.
  • Capital One Secured Mastercard Credit Card - The Capital One Secured Credit is a great option for someone who wants a simple credit card with a $0 annual fee. This card does not offer rewards but can be had for as little as a $49 security deposit that will unlock a $200 credit limit. You can increase your security deposit for a higher credit limit. The page for this credit card also states that every 6 months your account will be reviewed by Capital One. If you've used your card responsibly and you've made your payments on time, Capital One will consider raising your credit limit without you having to increase your security deposit.
  • First Progress Secured Credit Card - The First Progress Secured Credit Card comes with a $49 annual fee, however, the card more than makes up for it with an ultra low-interest rate of 9.99%. The other secured credit cards that we have included all come with a high-interest rate that ranges from 22.99% to 24.99%. So, if you're looking for a card with a low-interest rate, this card is the right one for you. The great thing about this card is that no minimum credit score is required, so whether you're just starting to build credit or you want to improve your bad credit, this is the right card for you.

How To Improve Your 500 Credit Score?

If you aren't approved for a regular unsecured credit card because you have a 500 credit score, there are a number of things that you can do to improve your 500 credit score.

Payments

The best thing that you can do to improve your 500 credit score is to make all of your credit card and loan payments on time. This is so because your payment history makes up 25% of your credit score. So, making your payments on time should boost your credit score.

Credit Utilization

The second best thing you can do to improve your credit score is to reduce the balances on your accounts. This is so because 20% of your credit score depends on the amount of your avaialble credit that you're using. The higher your balances, the lower your credit score will be. As a rule of thumb, you should strive to keep your credit utilization between 5% and 10% and to never use more than 30% of your available credit. Reducing your account balances may boost your credit score.

Reduce Applications

To improve your 500 credit score, you should refrain from submitting too many credit card and loan applications within a short period of time. This is so because every time you apply for a credit card or a loan, a hard inquiry is placed on your credit report. Although a single hard inquiry will only lower your credit score by 5 to 10 points, racking up too many hard inquiries can significantly reduce your credit score. So, to improve your credit, avoid applying for unnecessary credit cards and loans.

Keep Old Accounts Open

To improve your 500 credit score, you should keep your old accounts open. This is so because your overall average account age affects your credit score. The older your accounts, the better your credit score will be. So, although it may be tempting to close an old account or credit card, you should keep it open to improve your credit.

Check Your Credit Report

If you're not already in the habit of checking your credit report, you should periodically check your credit report. You can do this by signing up for any of the free credit report services currently available. Review your credit report and dispute any inaccurate items that appear on your credit report to improve your credit score.

Credit Score Planet Frequently Asked Questions (FAQs)

1. What is the Difference Between a Secured vs Unsecured Credit Card?

The only difference between a secured vs unsecured credit card is that a secured credit card requires you to place a security deposit with the card issuer before your credit card account is opened for you. Other than that, a secured credit card functions the same exact way as does a regular credit card

2. Can I get a regular credit card with a 500 credit score?

You may be able to get a regular credit card with a 500 credit score, however, it will be very difficult to get approved with such a low credit score. A 500 credit score is considered as very poor, so most card issuer will probably deny you if you apply for one.

3. How fast can you build credit with a secured credit card?

If you're just starting to build your credit, you can build credit with a secured credit card in as little as 6 months, however, if you're fixing your bad credit, it may take longer to improve your credit score. Some consumers have reported being able to improve their bad credit within as little as 12 to 18 months after opening and making timely payments on their secured credit card.

4. What is the minimum credit score for a secured credit card?

There is no set minimum credit score for a secured credit card. Card issuers offering secured cards know that consumers who apply for these cards are either starting off or have bad credit. As such, so long as you have the money for the security deposit, you should be approved for a secured credit card.


What Credit Score Is Needed For a Home Depot Credit Card?

Whether you're doing your own home improvements or you're a contractor who makes frequent visits to the Home Depot Store, you will benefit greatly from opening a home depot credit card. That said, we often get asked what credit score is needed for a Home Depot Credit Card? We will answer this question in much detail below.

What Credit Score Is Needed For a Home Depot Credit Card?

Consumers have reported that a credit score of 640 or higher is needed for you to get a Home Depot Credit Card. That said, some users have reported that they were approved for a Home Depot Credit Card with a 600 credit score. If you're unsure about whether you will be approved for a Home Depot Credit Card, Home Depot's website gives you the ability to check whether you're pre-approved for their credit card prior to applying.

If you're pre-approved before applying, you will likely be approved if you apply for the credit card. Checking to see whether you're preapproved for the Home Depot Store Credit Card does not affect your credit score because a soft inquiry is placed on your credit report. Soft inquiries do not hurt your credit.

That said, if you choose to apply for the Home Depot Credit Card, a hard inquiry will be placed on your credit report. A single hard inquiry can lower your credit score by 5 to 10 points, however, this impact is negligible and your credit score will likely quickly recover from the point drop.

Does Checking Whether You're Pre-approved for the Home Depot Credit Card Affect Your Credit Score?

No, checking to see whether you're pre-approved for the Home Depot Credit Card does not affect your credit score because a hard inquiry is not added to your credit report. When you check to see whether you're pre-approved for a home depot credit card, a soft pull is made to review your credit report. Soft pulls, commonly known as soft inquiries, have no impact on your credit.

Does Applying for the Home Depot Credit Card Affect Your Credit Score?

Yes, applying for a Home Depot Credit Card can lower your credit score by a few points because a hard inquiry is added to your credit report when Home Depot's partner Citi Banks reviews a copy of your credit report to make a decision on your credit application. If you've ever applied for a Home Depot Credit Card, you've probably noticed a hard inquiry labeled as "Home Depot CBNA" appear on your credit report. This is totally normal because Home Depot has partnered with Citi Bank to provide you with the Home Depot Credit Card.

That said, you should not worry too much about a hard inquiry as it may lower your credit score by a few points, and your credit score will recover fairly quickly after just a few months of responsibly using your credit card and paying it off on time.

Benefits of the Home Depot Credit Card

If you're thinking about applying for the Home Depot Credit Card, here are some of the benefits of this credit card:

  • You can finance a purchase of $299 or more for 6 months
  • You can finance promotion item purchases for up to 24 months
  • You will be given 1 year to make returns on any item purchase from Home Depot
  • If someone makes an unauthorized charge using your Home Depot Credit Card, you're not liable for such charges
  • $0 annual fee for the Home Depot Credit Card

Bottom Line

For you to qualify for the Home Depot Credit Card, you must have a fair credit score. Many consumers have reported that the Home Depot Credit Card requires applicants to have a minimum credit score of 640. That said, there are some reports of consumers with a 600 credit score being able to qualify for this credit card. If you're unsure as to whether you'll qualify for a Home Depot Credit Card, you can check whether you'll be approved prior to applying for the credit card by heading over to the Home Depot Website. If you have any general questions or comments, please feel free to leave them in the comments section below.


Can I Get a Credit Card With a 500 Credit Score?

If you're just starting to build your credit or you have poor credit, you still need a credit card. Almost all shopping and bill payments are done online. So, can you get a credit card with a 500 credit score? We will discuss the answer to this question in much detail below.

Can I Get a Credit Card With a 500 Credit Score?

With a 500 credit score, it will be very difficult to get a regular credit card because a 500 credit score is considered to be poor, and most major card issuers will likely deny your credit card application as they require a fair or good credit score. That said, although you may not be able to qualify for a regular unsecured credit card, you may be able to qualify for a secured credit card.

A secured credit card works exactly the same exact way as a regular credit card, however, to get a secured credit card, you must place a security deposit with the card issuer. The security deposit you place will usually determine your credit limit.

For example, if you want a secured credit card with a $500 limit, the card issuer will require that you place a $500 security deposit at the time you apply for the credit card.

If your application for a secured credit card is approved, the card issuer will deduct the security deposit from the account you added to your credit card application. The card issuer will then keep the security deposit and only use it if you fail to pay the credit card.

However, if you make all of your payments on time, card issuers will usually return the security deposit to you within 12 to 18 months of opening your secured credit card. Also, if you have an excellent payment history, the card issuer may convert your secured credit card into a non-secured regular credit card and return your security deposit to you.

Also, if for any reason you decide to close your secured credit card, your security deposit will be returned to you so long as your credit card has a $0 balance at the time of account closure.

Credit Cards You Can Get With a 500 Credit Score

As previously mentioned, it will be extremely difficult to qualify for a regular credit card with a 500 credit score, so here is a list of secured credit cards that are suitable for someone with a 500 credit score:

  • Bank of America Secured Credit Card
  • Capital One Secured Mastercard
  • Discover it Secured Credit Card
  • OpenSky Secured Visa Credit Card
  • First Progress Secured Credit Card

How Getting a Secured Credit Card Can Help You Improve Your 500 Credit Score

Getting a secured credit card will definitely help you improve your 500 credit score because secured credit cards function the same way as does a regular credit card. As such, they can help you improve your credit whether you're just starting off or you need to repair your credit.

That said, if you're using a secured credit card you will be able to improve your 500 credit score much quicker than would a person who has bad credit and wants to improve it.

That said, regardless of whether you're repairing your credit or building it from scratch, you can use a secured credit card to build your credit just as you would with a regular credit card.

So, if you're approved for a secured credit card, make sure to spend only as much as you can afford to pay off at the end of the month and make all of your payment in full and on time.

If you're just starting off, you should see a significant improvement within the first six months, however, if you're repairing your credit, it will take you a little longer and you should expect an improvement within 12 to 18 months of using and paying off your credit card on time.

Improving a 500 credit score is very important if you want to qualify for credit cards and loans at reasonable interest rates and favorable repayment terms. So, use your secured credit card responsibly and make your payments on time to begin improving your credit.

What Do You Need To Open a Secured Credit Card?

If you have a 500 credit score and can't get a regular unsecured credit card, you should open a secured credit card.

To open a secured credit card, you will need to fill out a secured credit card application by adding basic information, such as your name, address, social security number, income, and your banking information. Your banking information is required so that if you're approved for a secured credit card, the security deposit will be deducted from the account that you provided.

That said, you should keep in mind that the security deposit that you place with the card issuer will determine your credit limit. For example, if you place a $700 security deposit, the card issuer will give you a $700 credit limit.

You should keep in mind that the security deposit will not be used as a payment on your credit card, instead, the security deposit is used to compensate the card issuer in the event that you have a balance on your credit card and you stop making payments on your account.

So, if you default on paying off the credit card, you will give up your security deposit and you will cause significant damage to your credit. So, make sure to make your payments in full and on time.

Things You Can Do To Improve Your 500 Credit Score To Get The Credit Card That You Want

If you have a 500 credit score and you want to get a regular unsecured credit card, here are some tips that you should implement to improve your credit score.

Payment History

The first thing that you should do to improve your credit score is to make all of your credit card and loan payments on time. This includes making payments on your secured credit card on time. Your payment history accounts for 35% of your credit score, so making all of your payments on time will significantly improve your credit score. Missing even a single payment can cause significant damage to your credit. So, make your payments on time and you will notice an improvement in your score.

Balances

The second thing you can to improve your 500 credit score is to pay down the balances on your accounts. Your credit utilization (how much of your available credit you're using) accounts for 30% of your credit score. So, the more you can lower your balances, the more of an improvement in your credit score you will see. As a rule of thumb, you should keep your credit utilization between 5% to 10% but never exceed 30%. If your credit utilization exceeds 30%, you will notice a significant drop in your credit score. So, pay down your balance to improve your 500 credit score.

Application

To improve your 500 credit score to get the credit card that you want, you should avoid applying for too many credit cards and loans within a short period of time. This is so because every time you submit a credit application, a hard inquiry is added to your credit report. While a single hard inquiry will not lower your credit score by much, having too many hard inquiries on your credit report within a short period of time will significantly lower your credit score. So, avoid submitting too many applications and you should notice an improvement in your score.

Account Age

If you have old accounts that are open, you should leave them open to increase the overall age of your accounts. The average age of your accounts makes up 15% of your credit score. The older your accounts, the better your credit score will be. So, if you have an old account that you barely use and want to close, you should leave it open to avoid lowering the average age of your accounts.

Credit Report

If you're not already in the habit of checking your credit report, you should periodically check your credit report to ensure that there is no negative information lowering your credit score. If you find negative information that does not belong to you, you should file a dispute with the credit reporting bureau reporting the incorrect information to have it removed from your credit report so that it no longer pulls down your score.

Bottom Line

At this point, it should be clear that getting a credit card with a 500 credit score will be very difficult. So, instead of applying for a regular credit card, you should apply for a secured credit card. Secured credit cards work the same way as does a regular credit card, and so they will allow you to build your credit and improve it. Once you've improved your credit score, you can then apply for a regular credit card.


Can You Have Two of the Same Credit Card?

Almost every adult in the United States has a good credit card. Some of us may even have a credit card that we love and maybe thinking about opening an additional card of the same type. So, can you have two of the same credit card? We will answer this question in much detail below.

Can You Have Two of the Same Credit Card?

No, most card issuers will not permit you to have two of the same exact credit card. However, some card issuers offer different variations of the same card, and so you may be able to qualify for two of the same but slightly different credit cards. That said, although it's not totally unheard of for a person to have two of the same credit cards, most card issuers do not permit consumers to have two of the same credit cards.

Why would someone want to have two of the same credit card?

Some credit cards offer extremely good rewards or benefits, which makes having two of them better. For example, some airline credit cards offer cardholders the ability to have a passenger fly with them at a reduced rate or for free, so having two of the same credit card allows them to have two passengers fly with them at a reduced rate or for free. Airlines and card issuers have noticed this trend, and so some card issuers have prohibited consumers from holding two of the same credit card.

That said, there are ways around this. For example, if you have or wife or a girlfriend and you often travel with them, instead of you having two of the same credit card, open an account for them and they can enjoy the same perks you do.

As such, although having two of the same credit card may offer you additional rewards, credit card issuers know of the practice and have limited their exposure to paying out too many rewards and benefits by permitting consumers to only having one credit card of the same type.

Here Are Some Methods That Will Allow You To Have Two of the Same Credit Card

Different Variations of the Same Card

Some card issuers offer consumers different variations of the same credit card. These different variations may offer your the ability to hold two of the same credit card.

For example, Citi offers its American Airlines Credit Card in different variations, a visa American Airlines Credit Card, as well as an American Airlines American Express Credit Card.

Both cards offer the same benefits and rewards, the only difference is that one of the cards is a Visa card and the other is an AMEX card.

If you find a card issuer that provides such variations, you may be able to hold two of the same credit card.

That said, you should not apply for both cards at the same time. To approve your odds of being approved for both credit cards, apply for one of them, wait two to three months and then apply for the second card.

By doing this, you should be able to have two of the same credit cards.

Citi Bank is not the only card issuers that offers different variations of the same credit card. Bank of America and Chase offer different variations of the same credit card. If the different variations don't appear online, visit your local branch and they'll have access to the different variations and they'll be able to submit your application for the credit card that you want.

Authorized User

If you want to have two of the same credit card, one of the best ways to do this is to have someone else, such as your dad, mom, spouse, or girlfriend apply for the same credit card and add you as an authorized user on the account.

Once they've added you as an authorized user, you will be issued a credit card with your name on it just as would the primary cardholder. That said, the primary cardholder will be responsible for making payments on the account.

That said, you should be careful when adding yourself as an authorized user to another person's account because although the primary cardholder is responsible for making payments on the account. If they miss any payments, your credit will suffer because the account will appear on your credit report. So, only add yourself as an authorized user on another person's account that you know is responsible and will make timely payments on the account.

Applying For the Same Credit Card After Closing the Same Card

If you have a credit that offers rewards and a sign-up bonus and you closed your account, you may be approved for the same card again. However, some card issuers, such as American Express will not give you a sign-up bonus unless a certain amount of time has passed since you first received the sign-up bonus.

American Express and other card issuers do this to prevent consumers from constantly closing their accounts and re-opening them simply for the sign-up bonus.

That said if you have a specific credit card that you like and you close your account. If you wait for the specific period of time, you will be able to open the same credit card account again and qualify for any sign-up bonuses the card issuer is offering.

For example, American Express states that you can only qualify for a sign-up bonus once 24 months has passed since you first opened your account, not closed the account.

So, if you've had a credit card for 3 years and you closed your account, you may be able to open the same card and receive the sign up bonus yet against. However, to qualify for the credit card, you will need to have good credit. So, as long as you've made all your payments in full and on time, you should qualify for the same credit card.

That said, the waiting period is different from one card issuer to another. For example, to qualify for the sign-up bonus offered by the Chase Sapphire Credit Card, you will have to wait for 48 months from the date you received the first sign-up bonus to qualify for another one.

Credit Score Planet Frequently Asked Questions

1. Can you have two of the same exact credit card?

Some card issuers may allow you to have two of the same exact credit card, however, most card issuers prohibit you from having 2 of the same credit card.

2. Can you two credit cards from the same bank?

Yes, you can have more than one credit card from the same bank. Some banks offer different credit cards, and so you can have multiple credit cards from the same bank. That said, the credit cards will be different as most banks do not permit consumers to have two of the same credit card.

3. How long should you wait to apply for a second credit card?

You should wait at least 6 months to apply for a second credit card. Spacing out your credit card applications prevents the hard inquiries resulting from the applications from hurting your credit.

4. What happens if you apply for the same credit card twice?

If you apply for the same credit card twice, one of the credit cards may be denied as most card issuers only permit consumers to have one of the same credit card.

5. Can you apply for the same credit card that you already have?

Although you can apply for the same credit card that you already have, your card issuer will likely deny the application because most card issuers only permit consumers to have one of the same credit card. That said, if the card is slightly different, your application may be approved.


Do Secured Credit Cards Help Your Credit Score?

If you're like most Americans and you're just starting to build your credit or want to rebuild it, you may be exploring the option of applying for a secured credit credit card. We often get asked whether secured credit cards help your credit score? We will answer this question in much detail below.

Do Secured Credit Cards Help Your Credit Score?

Yes, secured credit cards are an excellent tool that can help you raise your credit score. That said, for a secured credit card to help your credit, you must use them responsibly and make your payments on time. You should try to pay off the entire balance at the end of your billing cycle, and at a minimum, you should make the minimum payment. Missing even a single payment on a secured credit card could cause significant damage to your credit score.

The best way to help raise and help your credit score using a secured credit card is to spend only as much as you can afford to completely pay off at the end of the month. Another tip is to keep the balance on your secured credit card below 10% and to never exceed 30%.

For example, if you have a secured credit card with a $1,000 credit limit, you should keep the balance on your credit card below $100 and never exceed $300. If you leave a high balance on your credit card, your credit score will suffer because the credit reporting bureaus lower the credit score for persons who exceed 30% credit utilization.

Many people have improved their credit score using a secured credit card by using it for a few bills and then paying off the credit card completely. This shows your card issuer that you're using your secured credit card responsibly by charging only what you can afford to completely pay off at the end of the billing cycle.

Within 6 to 12 months of using your secured credit in this manner, you may be able to get your security deposit back and your account converted into a regular unsecured credit card if your card issuer provides them.

What is a Secured Credit Card?

A secured credit card works exactly the same way as does a credit card, however, to obtain a secured credit card, you must place a security deposit with the card issuer. The card issuer will return the deposit to you within 12 to 18 months so long as you make all of your payments on pay off your balance before closing your secured credit card.

To open a secured credit it, you will be asked to place a security deposit using your checking or savings account when you apply for the credit card. If you're approved, the card issuer will deduct the security deposit from your bank account and issue you a credit card that's usually equivalent to the security deposit you placed with them.

For example, if you placed a $700 security deposit, you will be issued a credit card with a $700 credit limit. You would then use the secured credit card and make payments on it just as you would with a regular unsecured credit card.

If you use your secured card responsibly by only charging what you can pay off at the end of the month, and paying off your credit card prior to the due date, your card issuer will return your security deposit to you within 12 to 18 months of using your credit card.

Some card issuers will even go a step forward in that they will convert your unsecured credit card into a regular credit card offered by them. This will allow you to keep the good credit history that you've build with your secured credit card.

Should You Apply For a Secured Credit to Help Your Credit?

If you are someone who is just starting to build their credit or have bad credit, a secured credit card is one of the best ways to help build your credit, especially if you were denied a regular unsecured credit card.

If you do not have credit, meaning you're just starting to build your credit, you will see a positive impact on your credit score much quicker than someone who has bad credit and is trying to rebuild with a secured credit card. This is so because, for those who are just starting off with building their credit, there is no negative information to drag your credit score down.

After you've build and attained a good credit score, you can either ask your card issuer to convert your secured credit card into a regular unsecured credit card, or you can apply for a regular credit card while keeping your secured credit card open.

How Long Does it Take to Build Good Credit Using a Secured Credit Card?

If used properly, you can build credit using a secured credit card within three to six months. That said, if you're starting to build your credit from scratch, you will be able to build credit using a secured credit card much more quickly than someone who has damaged their credit and wants to rebuild it using a secured credit card.

If you have bad credit, it will take you a bit longer to build credit using a secured card. Some users have reported seeing an improvement in their bad credit within 12 to 18 months of responsibly using paying off their credit card. The time it takes you will vary depending on how much damage you've done to your credit.

How Do Lenders View Secured Credit Cards?

If you apply for a credit card or loan in the future and the lender reviews your credit report to determine your creditworthiness, a secured credit card that has good credit history is viewed just as favorable as is a regular unsecured credit card.

To see how a secured credit card has helped your credit card, you should check your credit report and credit score. Most banks now offer you the ability to track your credit score through their online portal. However, if your bank does not offer this feature, you can still check your credit report and score by using Credit Karma, it's totally free.

How Long Does it Take to Get Your Secured Credit Card?

Usually, once the card issuer approves you, it takes a 3 to 7 business days for you to receive your secured credit card. The time it takes to get approved varies, some approvals are instant while other credit applications must be reviewed by an agent before being approved or denied. It really depends on the information in your credit report. If you're just starting to build your credit and have no negative items on your credit report, you may be approved more quickly than someone who has negative marks on his report.

Credit Score Planet Frequently Asked Questions

1. How long does it take to build credit with a secured credit card?

If you're just starting off with building your credit from scratch, you can have a good credit score within 3 to 6 months of using and making timely payments on your credit card. However, if you have bad credit and negative items on your credit report, it could take 12 to 18 months to build good credit using a secured credit card because the negative information will lower your credit score.

2. What is the best-secured credit card?

The two secured credit cards that we recommend are the Bank of America Secured Visa Credit Card and the Discover it Secured Credit Card. These two cards are excellent for someone who want to build or improve their credit while being unable to obtain a regular unsecured credit card.

3. Can you be denied a secured credit card?

Yes, a card issuer can deny your secured credit card application.

4. Why would my secured credit card application be denied?

You can be denied a secured credit card for having negative information on your credit report, such as a foreclosure, bankruptcy, or other negative information. Also, if your income is too low, you may be denied.


Best Way to Pay Off Credit Cards to Improve Credit Score

If you're like most of us, you probably want to do whatever is possible to improve your credit score since everything from buying a home to leasing a car requires a good credit score. We often get asked what is the best way to pay off credit cards to improve your credit score? We will answer this question in much detail below.

What is the Best Way To Pay Off Credit Cards To Improve Credit Score?

The best way to pay off your credit is to pay off the entire balance on your credit card as quickly as possible and keep the balance as low as possible. Many people believe that leaving a balance on their credit cards helps their credit, but this is not true. Your credit score benefits the most from a low credit card balance.

This is so because your credit utilization accounts for 30% of your credit score. The lower your credit utilization, the better your credit score will be. Credit utilization refers to the amount of available credit you're using. The lower your account balances, the less credit you're utilizing, and the better your credit score will be.

That said, we understand that not everyone can completely pay off their credit card and that's totally fine. If you cannot pay off your credit card, you should at least make the minimum payment so that you don't hurt your credit. The minimum payment is the least amount of money that you can pay to keep your credit card account in good standing.

Failing to make the minimum payment on your credit cards will cause significant damage to your credit. This is so because failing to make the minimum payment will result in your account be reported as late to the credit reporting. Having a late payment can cause a significant drop in your credit score.

Should I Pay Off My Credit Card or Leave a Balance?

We often get asked this question and the truth is that leaving a balance on your credit card will not improve your credit score. Your credit score benefits the most from lowering the balance on your credit card. So, the next time you hear someone saying that leaving a balance on your credit card helps your credit, now you know that statement is not true.

This is so because your credit utilization accounts for 30% of your credit score. The lower your credit utilization, the better your credit score will be. Decreasing your credit utilization refers to lowering the balances on your accounts, the lower the balances, the better your credit score will be.

As a rule of thumb, you always want to keep your credit utilization below 30%. If you exceed or use more than 30% of your available credit, you will notice a drop in your credit score.

For example, if you have 3 credit cards with a total credit limit of $10,000, you should try to avoid leaving a balance of $3,000 or more. If you exceed a $3,000 balance, you will notice a drop in your credit score. So, keep your credit card balances as low as possible to help your credit and avoid a drop in your credit score.

Ideally, you should keep your credit card balances between 5% and 10% of your available credit, and never exceed a 30% credit utilization for the best impact on your credit score.

Making Only the Minimum Payment on Your Credit Card

If you want to improve your credit score, you should pay down your account balances. That said, we understand that not everyone has the cash to pay down their account balances. At a minimum, you should always make the minimum payment on your credit card. Failing to make the full minimum payment will cause significant damage to your credit.

Also, if you fail to pay the minimum payment, your card issuer may charge you late fees, as well as impose a penalty APR rate that will significantly increase the amount of interest that you will pay on your credit card debt.

That said, if you cannot completely pay off your credit cards, you should not stress out too much as the average American carries more than $5,000 of credit card debt. That's an amount that's not easy to come up within a short period of time.

That said if you have extra cash and want to improve your credit score by paying off your credit cards, pay off as much as you can afford to pay off.

When paying off your credit cards, you should pay off the credit cards with the highest interest rates first as this will make paying off your credit cards quicker and will save you money in the long run.

CSP Pro Tip: If you only make the minimum payment, it will take you a very long time to pay off your credit card debt. So, always make a payment that exceeds your minimum payment. This will drastically reduce the amount of time it takes to pay off your credit card and this will save you a ton of money in the long run.

How To Pay Off Credit Card Debt?

There are a number of different methods to pay off credit card debt. Here are some of these methods:

  1. Snowball Method - This method involves making all of the minimum payments on your credit cards and paying more than the minimum payment on the credit card with the lowest balance. Once you've paid off the credit card with the lowest balance, you should move on to the next credit card with the next lowest balance. Many people choose this method because making progress on paying off debt will motivate you to continue paying down your debt.
  2. Avalanche Method - The avalanche method is similar to the snowball method, but instead of targetting credit cards with the lowest balances, you will first pay off the credit cards that charge the highest interest rates first. This method will save you more money in the long run since you will end up paying less interest. However, some people still choose the snowball method because they feel like their making more progress by completing paying off the credit cards with the lowest account balances.
  3. Debt Consolidation - The third option that you have to pay off your credit card debt is debt consolidation. Debt consolidation involves taking out a personal loan and using those funds to pay off your credit card debt. Debt consolidation can save you a ton of money because the interest rates on personal loans are typically much lower than those charged by credit card companies. That said, you will need to have good credit to use this option as most lenders will not lend you money if you have poor credit. In addition to paying less interest, debt consolidation may be a good option for you because it will leave you with a single payment to make, you will no longer have to worry about paying off several credit cards.

By How Many Points Will Your Credit Score Improve After Paying Off Your Credit Cards?

Paying off your credit cards and lowering the balances on your credit cards can improve your credit score by more than 50 points. However, the improvement you will notice will vary depending on the information in your credit report. Some people may notice a smaller improvement while others may notice a bigger improvement.

That said, if you pay down your credit card balance, please share your experience and let us know by how many points your credit score improved after paying down your credit card balances.

Credit Score Planet Frequently Asked Questions

1. How much will your credit score increase after paying off your credit cards?

the number of points your credit score will increase is different from one person to another depending on the information in your credit report. That said, some people who have paid down their credit cards have noticed an increase of more than 50 points. Your mileage will vary depending on how significant of a reduction in your account balance you've made, as well as how you've handled other debts.

2. How can I raise my credit score?

You can raise your credit score by performing the following:

  • Making all of your payments on time
  • Reducing the balances on your credit cards and loans
  • Keeping old accounts open
  • Not applying for too many credit cards and loans
  • Periodically checking your credit report and disputing any incorrect information

3. Which credit cards should I pay off first?

You should pay off credit cards with the highest interest rates first to save money. That said, some people prefer paying down credit cards with the lowest balances first because paying off debts gives a sense of accomplishment. That said, choose the method that best suits you.

4. Is it a good idea to pay off your credit cards?

Yes, paying off credit cards is a good idea. So, if you have cash that you've set aside and don't need, you should use it to pay off your credit cards and reduce your account balances.

5. Is it better to pay off your credit card or keep a balance?

Paying off credit cards is better than keeping a balance. This is so because the credit scoring models reward those who have low credit utilization.


Will Adding Myself As An Authorized User Help My Credit?

If you live in the United States, you probably know that having good credit is essential for doing things, such as buying a car, buying a home, renting an apartment, and even finding a job. So, you might be wondering whether adding yourself as an authorized user on someone else's credit card will help your credit? We will answer this question in much detail below.

Will Adding Myself As An Authorized User Help My Credit?

Adding yourself as an authorized user on another person's credit card can help your credit so long as the person's credit card you're adding yourself onto as an authorized user has a lengthy history of on-time payments. After adding yourself as an authorized user to an account in good standing, you should notice a boost in your credit score.

Adding yourself as an authorized user is one of the quickest ways to quickly build credit. That said, if the primary user on the credit card misses payments or anything negative happens to the account, your credit score will suffer, as well. So, only add yourself as an authorized user on another person's credit card if you know that they are responsible enough to continue making timely payments on their credit card.

That said, if you want to build your credit, you should not solely rely on adding yourself as an authorized user, you should do the following to build strong credit:

  • Make your credit card and loan payments on time
  • Lower the balances on your credit and loan accounts
  • Don't apply for too many credit cards and loans within a short period of time
  • Keep old accounts open to boost the overall age of your accounts
  • Periodically check your credit report and dispute any inaccuracies on it

What Does Adding Yourself As An Authorized User Mean?

Adding yourself as an authorized user on another person's credit card means that the primary account holder contacts the card issuer and asks the card issuer to add your name to their account and issue you a credit card for the same account with your name on the credit card.

Once you've been added to their account as an authorized user, the credit history behind the credit card is added to your credit report as if you had opened the account. That said, only the primary cardholder is responsible for making payments on the car, the authorized user is not responsible for making payments on the account.

Since the primary cardholder is responsible for making payments on the account, you as an authorized user and the primary cardholder should have an agreement as to what you can and cannot spend on the credit card, so that the primary cardholder continues to make timely payments on the account.

In addition to adding yourself as an authorize user, you should explore the option of applying for your own credit card.

How Does Adding Yourself As An Authorized User Affect Your Credit?

When you add yourself an authorized user on another person's credit card, the credit history on the credit card will appear on your credit report. For example, if your dad adds you as an authorized user on his Bank of America Visa Card that he's had for 5 years and has made every single payment on time, his credit card account will be added to your credit report, meaning his entire payment history will appear on your credit report. If he's made every single payment on time and the account is in good standing, you will notice a significant boost in your credit score, especially if you're starting off with a low credit score.

So, if you know someone with an established account that has a good payment history, low balance, and has been open for a long amount of time, you will definitely benefit from adding yourself as an authorized user to that person's account.

That said, once the primary cardholder adds you as an authorized user, your credit will be affected once the account only once the account is reported on your credit report. After the account appears on your credit report, you should notice a boost so long as the account is in good standing and has been paid on time.

If the primary account holder, for any reason, fails to make a single payment, your credit score could suffer greatly as a result. So, be careful who you ask to add you as an authorized user because their actions on the account will affect your credit score so long as you're an authorized user on the account.

Alternatives to Adding Yourself As An Authorized User to Help Your Credit?

Whether you're just applying for your first credit card or you're rebuilding your credit, the best alternative you have to adding yourself as an authorized user is to apply for a secured credit card.

A secured credit card will help your credit just as a regular unsecured credit card would. That said, the difference between a secured credit card and a regular credit card is that to obtain a secured credit card, you will have to place a security deposit with the credit card issuer to obtain the credit card.

Usually, your security deposit will determine your credit limit. For example, if you give your credit card issuer $500, your credit limit will be set at $500. The card issuer will then keep the security deposit and will refund your money if you use your secured credit card responsibly and make all of your payments on time for at least 12 to 18 months.

Also, if you pay off the balance on your secured credit card and choose to close down the account, your security deposit will be refunded to you.

The credit card issuer only keeps the security deposit as collateral in the event that you fail to pay off the balance on the credit card.

That said, a secured credit card is a great way to build and help your credit so long as you use the credit card responsibly and make all of your payments in full and on time.

Missing even a single payment on a secured credit card, regular credit card, or loan can cause significant damage to your credit score, so if you want to improve your credit, make sure to make all of your payments on time.

What Are The Disadvantages of Adding Yourself As An Authorized User?

We have discussed the fact that adding yourself as an authorized user on another person's credit card can help your credit, however, just as adding yourself as an authorized user can help your credit, it could hurt your credit just as much.

When you add yourself as an authorized user to another person's credit card, the account is added to your credit report. This means that if the primary account holder misses any payments or stops making them, your credit will suffer just as if you had stopped making payments on your own credit card.

Also, if the primary cardholder had missed payments in the past, your credit may be negatively impacted, as well. So, before anyone adds you as an authorized user to their credit card account, you should ask them about their past payment history and whether they've missed any payments or have a high account balance. Having any of these things may hurt your credit instead of helping it.

How To Build Your Credit Without Adding Yourself As An Authorized User?

  • Make your payments on time - The best thing you can do to help your credit besides adding yourself as an authorized user to another person's account is to make your credit card and loan payments on time. Your payment history accounts for 35% of your credit score, so making your payments on time will help your credit. Missing even a single payment can cause significant damage to your credit. So, avoid it if possible.
  • Reduce your account balances - The second best thing you can do to help your credit is to pay down your account balances to decrease your credit utilization. Your credit utilization accounts for 30% of your credit score, so paying down credit card debt and other loans will help your credit score.
  • Don't apply for too much credit - The third thing you can do to help your credit is to avoid applying for too many credit cards and loans within a short period of time. This is so because each time you apply for a credit card or loan, a hard inquiry is placed on your credit report when your lender or creditor views your credit report. Although a single hard inquiry will only lower your credit score by 5 to 10 points, too many hard inquiries within a short period of time can cause a significant drop in your credit score.
  • Account age - The fourth thing you can do to help your credit is to keep old accounts open. This is so because the older your accounts, the higher your credit score will be. So, although it may be tempting to close down an old credit card that you barely use, you should keep it open to avoid a drop in your credit score.

Bottom Line

Adding yourself as an authorized user on another person's credit card can help your credit score so long as the credit card you're adding yourself onto has an excellent history of timely and complete payments. That said, just as adding yourself as an authorized user can help your credit score, it can hurt you if the primary account holder fails to make payments on the credit card. So, be cautious whose account you add yourself to as an authorized user, make sure it's someone reliable who will continue to make full and timely payments.


Personal Loan vs Line of Credit (Explained)

Whether you need money to remodel your home, pay an unexpected medical bill, or to start a business, you may be wondering whether to take out a personal loan or use your line of credit. The post will dive deep into the difference between a personal loan vs line of credit. We will explain the difference between the two below.

Personal Loan vs Line of Credit (Difference Explained)

A personal loan allows a person to borrow a fixed sum of money that must be repaid according to a fixed schedule. This is different from a line of credit where a person borrows money from a line of credit on an as-needed basis and has the ability to repay the money according to his or her own schedule, so long as the person makes the minimum monthly payment.

Summary of the Differences Between a Line of Credit vs Personal Loan

  1. Fund Dispersal - The way the funds are dispersed or paid out is different depending on whether you choose to borrow money from a line of credit vs personal loan. With a personal loan, you're given a lump sum of money upfront. This is different from a line of credit, where you have access to a credit line that allows you to borrow money as you go.
  2. Repayment - When deciding whether to take out a personal loan vs line of credit, you should consider the method of repayment. For a personal loan, you will usually agree with the lender and the term of repayment, after you've agreed upon the terms, you will usually have a set monthly payment that you must make every month until the loan is paid off. The repayment of a line of credit is different in that you have no set monthly payment that you must make. The amount of money that you must repay depends on how much you've borrowed and the lender will most likely impose a minimum payment that you must make. The minimum payment is calculated based on the amount of money that you've borrowed. Usually, the minimum payment is set at 1% to 2% of the money that you have borrowed.
  3. Interest - Whether you choose to borrow money by taking out a personal loan or by obtaining a line of credit, you will have to pay interest on the money that you borrow. That said, borrowing money using a line of credit is typically significantly more expensive than borrowing money by taking out a personal loan. With a personal loan, the amount of interest that you'll have to pay is almost always lower and it's fixed, making your payments predictable and the same month over month. However, with a line of credit, your interest rate may change as you pay off your debt.

To illustrate the difference between a personal loan and a line of credit, see the following examples.

Personal Loan

If you head down to your local bank and take out a personal loan in the amount of $10,000, the bank will give you $10,000 in a lump sum. If you have good credit, you may qualify for a good interest rate, such as 4.95%. Let's assume that the repayment term is 3 years. This will require you to make a $299 payment every month for 36 months.

On the other hand, with a line of credit, you have the option of borrowing money using your credit card's line of credit or you can take out a home equity line of credit.

Credit Card Line of Credit

If you have a credit card with a $10,000 line of credit, you can borrow up to $10,000 using your credit card. By using your line of credit, you have the flexibility of making payments on your own schedule.

That said, you will have a minimum payment that must be paid every month to keep your account in good standing. The average minimum payment is 2% of the amount of money that you've borrowed. So, if you borrow $10,000, you should expect to make a minimum payment of at least $200.

However, if you're only making the minimum payment, the amount of time that it will take you to pay off the money you've borrowed will be significantly longer than the amount of time it takes you to pay off a personal loan. This is so because the interest rate on personal loans is usually significantly lower than that of a credit card.

Having said that, borrowing money using your credit card's line of credit is probably the most expensive option that you have to borrow money as the interest on credit card balance ranges from 14% to 20%, depending on the type of credit card that you have.

This is significantly more expensive than the

Home Equity Line of Credit (HELOC)

If you have a home, you may be able to access a home equity line of credit by using your home as collateral to borrow money. Unlike a personal loan where you're given a lump sum of money, with a HELOC, you're given a line of credit for a number of years that you can borrow money from on an as needed basis similar to a credit card.

The advantage that HELOC has over a credit card line of credit is that the interest rate on a HELOC is usually much lower than that of a credit card. This is so because with a HELOC you're using your home as collateral. As of September 4th, the average interest rate on a HELOC is 4.7%, which is significantly lower than the interest rate on a credit card line of credit.

That said, unlike a credit card where the line of credit is usually unsecured, a HELOC is a secured line of credit with your home as collateral. So, if you default on your payments, your lender could foreclose on your home to recover some of its money, especially if you have a good amount of equity in your home. As such, you should be careful when using a HELOC because you could lose your home if you don't make your payments on time.

Secured vs Unsecured

Whether you're considering taking out a line of credit or personal loan to borrow money, you have the option of a secured personal loan vs unsecured personal loan, and you have the option of a secured line of credit vs unsecured line of credit.

Secured Personal Loan

Not all personal loans are the same. You have secured personal loans, which are loans where the borrower places collateral in return for being able to borrow money. If you default on a secured personal loan, the lender can legally take the collateral as repayment for the money that you borrowed but did not pay back. For example, if you took out a personal loan and you placed your home as collateral, the bank can foreclose on your home if you do not pay back the money that you borrowed.

Unsecured Personal Loan

An unsecured personal loan is different from a secured loan in that there is no collateral attached to the loan. The lender gives you the money based on your creditworthiness and promise to repay the money. Unsecured loans usually come with higher interest rates because the lender is taking a bigger risk since there is no collateral to reimburse the lender if the borrower defaults on the loan.

Secured Line of Credit

A secured line of credit is one where your credit line is secured against collateral that belongs to you. In the event that you fail to pay back the amount of money that you've borrowed, the lender will take the collateral as payment for the past due debt.

For example, if you take out a home equity line of credit, your line of credit is secured by your home as collateral. If you stop making payments on your line of credit, the lender could foreclose on your home to recoup the money that you borrowed and failed to pay back.

The same logic applies to a secured credit card. Secured credit cards work the same way regular unsecured credit cards work, the only difference is that you have to place a security deposit before the lender allows you to borrow money using it.

If you use a secured credit cards line of credit and fail to pay back the money that you borrowed on time, the card issuer can take the security deposit you placed with them to satisfy the unpaid debt.

Unsecured Line of Credit

An unsecured line of credit is a line of credit where the borrower does not place collateral to borrow money. The biggest example of an unsecured line of credit is a credit card. Most credit cards are unsecured, meaning the borrower is permitted to borrow money based on his creditworthiness and promise to repay the money he has borrowed. An unsecured line of credit is probably the most expensive way to borrow money because credit cards usually come with high-interest rates on the money that you borrow. The average APR on a credit card today is 15%, making it very expensive to borrow money using your credit card.

Should You Take Out a Personal Loan or Use a Line of Credit?

If you have a one-time purchase or bill that you need to pay, taking out a personal loan is more appropriate than obtaining a line of credit. Also, personal loans come with predictable monthly payments at low-interest rates. However, if you have on-going expenses, a line of credit is more suitable for you. So, when you don't know how much you're going to need, a line of credit is the better option. However, you should be aware of the fact that borrowing money using a line of credit may be more expensive, however, you will have more flexibility in paying back the money that you've borrowed.

Credit Score Planet Frequently Asked Questions

1. Which is better a personal loan or line of credit?

A personal loan is better for a person who knows the exact amount of money he needs because the funds are dispersed in a lump sum. If you do know the amount of money that you need, a personal loan is a better options because they comes with lower interest rates, meaning they're a cheaper method of borrowing money.

2. What is the difference between a loan and a line of credit?

A loan allows you to take out a fixed amount of money in a lump sum, whereas with a line of credit, you will have a revolving line of credit that allows you to draw money on an ongoing basis. Loans typically have lower interest rates than lines of credit.

3. Do you need a good credit score for a line of credit?

Whether you're applying for a line of credit or personal loan, you will have to have a good credit score, especially if the loan or line of credit is unsecured, meaning you're not putting up collateral to borrow money.


Does Closing a Credit Card Hurt Your Credit Score?

If you're like most of us, you probably have too many credit cards to keep track of and you may have a credit card that you barely use and might be thinking about closing your credit card. That said, regardless of the reason that you want to close your credit card for, you might ask yourself the following question: Will closing a credit card hurt your credit score? We will answer this question in much detail below.

Does Closing a Credit Card Hurt Your Credit Score?

Closing a credit can hurt your credit score for multiple reasons. It can hurt your credit score because it increases your credit utilization and it reduces the overall ages of your accounts. So, although you may believe that closing your credit card is a good idea, you should avoid doing so if you do not want to cause a drop in your credit score.

Credit Utilization

Closing a credit card can hurt your credit score because it may increase your credit utilization. Your credit utilization refers to the amount of your available credit that you're using. This factor accounts for 30% of your credit score, so an increase in your credit utilization will cause a drop in your credit score.

As a rule of thumb, you should never utilize more than 30% of your available credit. Ideally, you want to keep your credit utilization between 5% and 10%. Here is an example of how closing a credit can increase your credit utilization.

For example, if you have the following credit cards:

  • Card 1 - Credit limit $5,000 and Card Balance $0
  • Card 2 - Credit limit $3,000 and Card Balance $1,000
  • Card 3 - Credit limit $2,000 and Card Balance $1,000

If you look at the following credit cards, you have a total credit limit of $10,000 and you're currently utilizing $2,000 of the available credit, making your credit utilization 20% of your available credit, which keeps you in the safe zone below 30%.

However, if you close down Card 1 you're available credit will become $5000 and you're credit utilization would jump from 20% to 40% ($2,000 from $5,000). This is a significant increase in your credit utilization, which will cause a drop in your credit score.

So, if there isn't a compelling reason to close your credit card, you should keep it open to avoid a drop in your credit score. You should definitely keep the credit card account open if you plan on making a major purchase, such as a home to ensure that you have the best possible credit score when you apply for a home loan.

Overall Account Age

Closing a credit card can hurt your credit score because it decreases the overall age of your accounts. Your account age accounts for 15% of your credit score. So, if you're closing an account that you've had open for a long period of time, closing such a card can cause a drop in your credit score. The older your account, the bigger the drop will be.

If you have a credit card that you've had for a very long period of time, you should avoid closing it, especially if it's the first credit card that you opened to begin building your credit.

You should explore the option of switching your account to a different credit card. Many card issuers have credit cards that you can upgrade to without losing the credit history you have on your credit card. So, explore this option if you want a better credit with more rewards or a lower APR.

Bottom Line

Regardless of the reason that you have for closing a credit card account, you should consider the consequences of closing your card. Although your credit score may take a small hit when you first close down a credit card, especially one that you've had for a very long period of time, your credit score should recover within a short period of time, so long as you continue to make all of your payments in full and on time.

You Should Consider Alternatives To Closing Your Credit Card

If you're worried that closing down your credit card may hurt your credit score, you should consider the alternatives available to you.

The first and best alternative to closing down your credit card is to ask your card issuer about switching your credit card over to another card that has the options that you want.

For example, at Credit Score Planet, we have had success switching over our Bank of America, American Express, and Citi credit cards to other cards from the same card issuer while retaining the credit history you've built behind your old credit card.

If you want to close down your credit because it has a high annual fee, you should consider contacting your card issuer and ask them to lower your annual fee or waive it. Some card issuers will be willing to assist you.

In the event that you want a credit card that offers more rewards, you should also contact your card issuer and ask them about upgrading your current credit card to one that has rewards while keeping your credit card history. This is possible if your current card issuer offers other credit cards that you're interest in applying for.

If you want to close down your credit card because you find yourself spending way too much money, you should ask your card issuer to place a credit card freeze on your account to prevent you from making additional charges on the card. This is one alternative to closing down your credit card and hurting your credit score.

When Should You Close Down Your Credit Card?

You should close down your credit card if any of the following apply:

  • Your credit card comes with a high annual fee and the rewards that you're earning are not enough for you to recoup the cost of the fee, and you've contacted the card issuer to have the fee waived or reduced and they refused to do so.
  • Your credit card has a very high interest rate and you've attempted to contact your card issuer to lower the interest rate and they refused to do so.
  • Your credit card does not offer you the rewards that you want and you want to close your account to apply for an account that offer rewards. Before closing your credit card account, you should attempt to contact your card issuer and ask them about credit cards that you can upgrade to that offer rewards. If your card issuer does not offer such an option, you should close down your credit card.
  • You do not want to accumulate more debt and so you want to close down your credit card. Before closing down your card, explore the option of freezing your credit card prior to closing it down to avoid hurting your credit score.

When Should You Keep Your Credit Card Open?

Just as there are reasons as to why you should close down your credit card, here are some reasons why you should keep your credit card open:

  • The credit card that you want to close if the first card that you ever opened
  • You have had the account for a very long period of time
  • You have a few accounts open
  • Your credit card has flawless payment history and you've had it for a significant period of time

What is the Safe Way To Close Your Credit Card?

If you have decided that closing your credit card is the best option for you, here are some steps that you should follow to ensure that you don't cause a significant drop in your credit score:

  • You should pay off the credit card, leaving a $0 balance prior to closing it
  • You should call your credit card issuer and confirm that the balance has been paid off and ask them to close down your credit card and send you confirmation that the account has been closed in good standing
  • If you're using your credit card to make automatic payments, make sure that you stop such payments to avoid accidentally leaving an unpaid balance on your credit card
  • If you have any authorized users on your credit card account, you should instruct them to stop using their credit card prior to closing down your account to avoid leaving an unpaid balance
  • After closing the account, you and any authorized users should destroy the credit card either by shredding it or cutting it into small pieces
  • Check your credit report within 30 days to confirm that your account appears as closed and paid as agreed

Does Closing A Credit Card Remove it From Your Credit Report?

Closing a credit card account will not remove it from your credit report. If you made all of the payments in full and on time on your credit card, the credit card will remain on your credit report for 10 years from the date that you closed your account. However, if you missed any payments on your credit card account, your credit card will remain on your credit report from the date that you first became delinquent on making credit card payments. After the 7 or 10 year period has passed, the account will automatically be removed from your credit report.

Credit Score Planet Frequently Asked Questions

1. Is it better to cancel unused credit cards or keep them?

If you have an unused credit that you've had for a long period of time and have build a positive payment history behind, you should keep your account open as closing it may cause a small and temporary drop to your credit score.

2. How much does closing a credit card hurt your credit?

Closing a credit card can cause a small drop in your credit score that's usually a few points.

3. How many credit cards should a person have?

The average person has 3 to 4 credit cards. There is no magic number of credit cards that you must have, but having 3 to 4 credit cards is normal.

4. Should I close my oldest credit card?

You should always avoid closing your oldest credit card because chances are that it has a lengthy payment history and it contributes to an older account age, which helps your credit score. So, keep your old account open and consider alternative to closing down your account if you're not satisfied with it.


Do I Get My Deposit Back From a Secured Credit Card?

Whether you have bad credit or you've never applied for a credit card or loan, a secured credit card may be the best option for you. As you probably know, to get a secured credit card, you must place a security deposit with the card issuer and the security deposit determines your credit limit. So, will you get your security deposit back from your secured credit card? We will answer this question in much detail below.

Do I Get My Deposit Back From a Secured Credit Card?

If you make all of your payments on time, you will get your security deposit back from a secured credit card. Typically, card issuers will return your security deposit if you use your credit card and make all of your payments on time within 12 to 18 months of opening your secured credit card.

Many people mistakenly believe that a secured credit card is not a real credit card, but the truth is that a secured credit card will help or hurt your credit as does a regular unsecured credit card. Your payment history and account status is reported to the credit reporting bureaus.

So, if you make all of your payments on time, you will be helping your credit score by doing so. In the event that you can cancel your secured credit card, your security deposit will be returned to you so long as the balance on the credit card has been paid.

The security deposit is just that, a deposit that's help by the card issuer as collateral that will be taken by the card issuer only in the event that you stop making timely payments on your credit card. So long as you use your secured credit card and make timely payments, your security deposit will eventually be returned to you.

Typically, your security deposit will be returned to you within 12 to 18 months of making timely payments on your credit card. Most card issuers will convert your secured credit card into a regular unsecured credit card once you've established that you're using your credit card and paying it off in full and on time.

Two great secured credit cards that we have personally used are Bank of America's Secured Visa Credit Card and Discover's Secured Credit Card. Bank of America returned our security deposit within 12 months of having the secured credit card open, while Discover returned our security deposit within 8 months of having the secured credit card open.

When Do You Get Your Deposit Back From a Secured Credit Card?

Typically, card issuers will review your account within 12 to 18 months of opening your secured credit card. If you've used your secured card responsibly and made all of your payments on time, your card issuer may decide to return your deposit and convert your account into a regular unsecured credit card. Bank of America performs this review after 12 months of opening your account, while Discover claims to review accounts within 8 months of opening them. Both card issuers have unsecured credit card options that your secured account can be converted to.

Your Security Deposit Determines Your Credit Limit

With a secured credit card, your security deposit determines your credit limit. For example, if you place a $500 security deposit, your credit limit will be set to $500. If you want a higher credit limit, you can increase your security deposit. For example, if you want a $2000 credit limit, you can get it by placing a $2000 security deposit with your card issuer. If you need a higher credit limit, you should make a larger security deposit, as long as you make your credit card payments on time, your security deposit will be returned to you within 12 to 18 months.

For example, the Bank of America Secured Credit Card requires a minimum security deposit of $300 and permits a maximum security deposit of $4,900. Your security deposit will determine your credit limit. So, make the security deposit that's right for you, and that will be your credit limit for the time being. If you want another option, you should check out the Discover It Secured Credit Card. This secured credit card permits you to make to place a minimum security deposit of $200 and a maximum security deposit of $2,500. Again, like the Bank of America Secured Credit Card, your security deposit will determine your credit limit.

Why Should You Get a Secured Credit Card?

You should get a secured credit card because if it's used properly, it will have a good impact on your credit score just as a regular unsecured credit card would. Secured credit cards are accepted everywhere regular credit cards are accepted. If you open a secured credit card and make all of your payments on time, you will improve your credit score, especially if you're just starting off with building your credit or you're trying to repair it.

This is so because your payment history accounts for 35% of your credit score. Your secured credit card account status is updated with the credit reporting bureaus, so if you're making your payments on time, your on-time payments will improve your credit score.

In addition to making timely payments, you should try to keep the account balance on your secured credit card low. This is so because your credit utilization accounts for 30% of your credit score. The lower the balance on your secured credit card, the better it will be for your credit score.

As a rule of thumb, you should strive to keep your credit utilization below 30%. If your credit utilization exceeds 30%, you will hurt your credit score. For the best impact on your credit score, you should keep your credit utilization below 10%, but never exceed 30%.

How Does a Security Deposit on a Secured Credit Card Work?

If you've never applied for a credit card or have a bad credit history, your only option to have a credit card may be to apply for a secured credit card. If you're approved, you will have to pay what is known as a security deposit and the security deposit will determine your credit limit. The security deposit is usually refunded within 12 months so long as you make all of your payments on time and use your credit card responsibly. However, if you default on your credit card, you will not get your security deposit back. Instead, the security deposit will be used to repay the amount of money that you owe on the credit card.

Typically, you will pay the deposit when you apply for the secured credit card. Most banks will ask for the source of funds, such as a checking account or savings account, and you will enter this information when applying for the credit card. If you're approved, your credit card will be issued and the funds will be debited from the account you provided in your credit card application.

Usually, you will be able to select the credit limit that you want, for example, the Bank of America Secured Credit Card permits you to make a minimum deposit of $300 or a maximum deposit of $4,900. Your security deposit usually determines your credit limit. If you make your payments on time consistently, the bank may raise your credit or convert your secured credit card into a regular unsecured credit card. That said, not all banks have an unsecured credit card that they can offer to you, so check with your card issuer before applying.

Getting a Regular Unsecured Credit Card

If you have good credit, you will not need to go through the hassle of applying for a secured credit card. To get a regular unsecured credit card, you must have good credit. This is so because lenders are only willing to take a risk on people with good credit because those with good credit are likely to repay the money they use on their credit cards. Credit card issuers are not willing to take a risk on those with low credit scores because they have do not have a good history of borrowing and repaying money on time.

If you don't have credit or have a bad credit, the best place to start is a secured credit card. Secured credit cards give you a chance to prove that you are able to borrow money and repay on time. To improve or build your credit, you should use your secured card responsibly by only using it to make purchases that you can afford to pay off at the end of each month. This will help you establish a good payment history, which is the biggest factor that affects your credit score. Also, keep your credit balance low because your credit utilization is the second most important factor affecting your credit score.

Bottom Line

Although it may seem expensive to play a security deposit to open a secured credit card, if you're just starting to build your credit or you have bad credit, having a secured credit card that you use responsibly and always pay on time can do wonders for your credit score. So, although it may be painful to put down the cash for a credit card, you should do so to improve your credit. Also, don't forget that if you use your card and make all of your payments on time, your security deposit will be refunded to you within a short period of time.

Credit Score Planet Frequently Asked Questions

1. How do you get your money back from a secured credit card?

You can get your money back in one of two ways. If you decide to close down your secured credit card and you've paid off the balance on your account, your security deposit will usually be sent back to you. Also, if you've had your secured credit card for approximately 12 months, your account may be converted to a regular unsecured credit card at which point your security deposit will be mailed to you in the form of a check.

2. How long does it take to get a secured credit card deposit back?

Usually, it takes approximately 12 to 18 months to get your security deposit back. Some credit card issuers will refund your deposit in as little as 8 months.

3. How much should I deposit on a secured credit card?

With most secured credit cards, your security deposit is your credit limit. So, make a deposit that's equivalent to the credit limit that you need. For example, if you want a $2,000 credit limit, you should make a $2,000 security deposit

4. Will I get my security deposit back from a Bank of American Secured credit card?

Yes, if you make all your payments on time and pay off your Bank of America secured credit card, your security deposit will be refunded to you. Also, if you BOA secured credit card is converted into a regular credit card, your security deposit will be refunded to you.