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How To Use Secured Credit Cards To Build Credit

Catherine Hiles • January 22, 2025

Responsible credit card use is one of the best ways to build and improve your credit. But if your credit score is low – or non-existent – you may have trouble getting approved for a traditional credit card.

That’s where secured credit cards come in. This type of card can help you establish credit if used responsibly. Learn how this type of card works and how to use a secured credit card to build your credit.

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How secured credit cards work

With a traditional credit card, the issuer sets the limit based on your credit history and score. Secured credit cards work differently. Your credit limit is based on a cash deposit you make when you open the account – for example, if you deposit $200, your credit limit is $200. This deposit is collateral for the card issuer as they can keep the money if you fail to repay what you borrow. The added security of the cash deposit means card issuers will often approve secured credit cards for customers with no credit history or low credit scores.

You can use a secured credit card to pay for goods and services like a traditional or unsecured credit card, and you’ll pay off your monthly balance to reset your credit limit. As you pay off the balance, your payments will be reported to the three major credit bureaus (Experian, Equifax, and TransUnion).

Best ways to build credit with a secured credit card

Responsible use of your secured credit card can help you build credit. Here’s how you can boost your credit score with this card type.

1. Shop around for the right card

Not all secured credit cards are created equal, so choosing the one that best suits your needs is essential. Consider the following:

  • Reporting: Check that the card you’re considering reports to all three major credit bureaus. This is essential in boosting your credit score.
  • Fees: Review the card’s fees and interest rates to ensure you won’t incur additional debt while using your secured credit card.
  • Grace period: Check to see whether the credit card has a grace period, which allows you to pay your bill without incurring interest.
  • Security deposit: Review the card’s security deposit options to ensure they work for your budget.
  • Upgrade potential: Check whether the card issuer will let you upgrade to an unsecured credit card once you’ve boosted your score enough to qualify for a lower rate.

2. Make your deposit

Once you’ve chosen a card and applied, have your deposit ready to open the account. This might mean saving the deposit amount before applying for the card to ensure your application doesn’t expire.

3. Pay on time

Your payment history makes up 35% of your FICO® Score, making it the most critical factor in boosting your credit.¹

Therefore, making on-time credit card payments is the best and quickest way to improve your credit score. Your card issuer will report your payments to the credit bureaus, and late payments will negatively affect your credit score. Setting up automatic payments can help prevent late payments.

4. Keep a low balance

Credit card utilization, the amount of available credit you’re using, makes up 30% of your FICO® Score.¹

Keep your balance low by making small purchases on your card and paying them off monthly to ensure you’re positively impacting your credit score.

5. Pay off additional debt

In addition to using your secured credit card responsibly, paying off any outstanding debt can help boost your credit score.

6. Monitor your credit score

Check your credit score each month to monitor your progress. Keeping an eye on your score can also help you catch any errors early so you can address them before they majorly affect your credit profile.

How a secured card can impact your credit

A secured credit card is a fantastic option if you’re trying to build or increase your credit score. It can help you practice good credit habits, such as making on-time payments, keeping a low balance, and paying down debt. Over time, using your secured credit card will also boost your length of credit history, which makes up 15% of your FICO® Score.¹

The issuer will report your payments to the credit bureaus when you use the card. Your credit score updates whenever lenders report new information to the bureaus, typically once a month. Your credit score will increase as long as you’re using the card responsibly and paying off the balance each month – and you can maintain a good credit score by continuing to practice responsible credit card usage. Once you’ve boosted your score enough, you can apply for a traditional credit card or a loan and will likely get a lower interest rate.

Level up your credit score with a secured credit card

Consistently using your credit card for everyday expenses and paying it off monthly can positively impact your credit score. This can open the door to better loan terms and credit card rates to help you reach your financial goals.

Learn how to read a credit report to monitor your credit score once you’ve boosted it.

FAQs

How do I get a secured credit card with bad credit?

One of the most significant advantages of a secured credit card is that people with poor or no credit can still apply for a secured credit card. With a secured credit card, you’ll pay a cash deposit as a safety net if you are ever late on your payments. Some card companies may deny you a secured card if you have a history of bankruptcy or foreclosure.

How much should I put on a secured credit card?

The minimum and maximum amount you can deposit onto a secured credit card vary by issuer. But in general, be prepared to pay a deposit of at least $200 for a secured card.²

The amount you decide to deposit will depend on multiple factors, such as how much you can realistically afford to set aside, what you want your credit limit to be, and your credit utilization. Aim to deposit an amount that allows you to have a low utilization ratio. Credit scoring models tend to penalize utilization over 30%, so if your credit limit is $200, you won’t want your balance to exceed $60.³

How long should I keep a secured credit card?

The longer your account stays open, the longer your credit history grows, which can help your credit score. A good rule of thumb is to keep your secured credit card account open until you are fully ready for an unsecured card.

You can try applying for an unsecured credit card to see if you qualify. If you don’t, keep your secured card and continue to work on improving your credit score. Make sure to monitor your credit report and score regularly.

How much will a secured credit card raise my score?

It’s hard to say exactly how much a secured credit card will raise your credit score or how fast your score will improve.

Let’s say you pay your bills on time and maintain a low credit utilization rate. If so, you might start to see an improvement as soon as 30 to 45 days after you’ve started to make changes.² If you start with a bad credit score, you can expect to qualify for an unsecured card for fair credit within 12 to 18 months.³

How do I make the switch from a secured credit card to an unsecured one?

Sometimes, your credit card issuer will automatically transition you to an unsecured credit card after you’ve proven you can use your secured credit card responsibly. This is the best-case scenario because it doesn’t require opening a new account.

However, some card issuers won’t do this. In that case, you’ll need to close your secured credit card before you can receive your security deposit back, and you’ll most likely need to apply for an unsecured credit card on your own.

Chime Credit Builder Secured Visa® Credit Card
  • Build credit safely
  • No credit check to apply
  • No annual fees
  • No interest~
Get Started