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.