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Using a secured credit card to build credit is a path that several Americans follow. However, the effect this might have on your credit score depends on different factors. For example, people with no credit history can expect better results than those with poor credit because of previous blemishes on their credit reports. Moreover, how you decide to use your newly acquired secured card also affects your credit score.
If you have no credit history, getting your first credit score with a secured card may take up to six months. If you have poor credit, you can usually expect to see the effect of your new secured card on your credit score in a month or two.
On This Page:
- How Much Will a Secured Credit Card Raise My Score?
- How to Build Credit Fast Using a Secured Credit Card
- Best Secured Credit Cards to Build Credit
- Other Questions You May Have About Secured Credit Cards
MoneyGeek’s Takeaways
It can take up to six months for people with no credit histories to establish their credit scores.
If you have poor credit, you may notice a change in your credit score after using a secured credit card for a month or two.
Make your payments on time and keep your outstanding balances low to improve your credit score.
Some of the links on this page will take you to one of our partner's sites, where you can compare and apply for a selected credit card.
How Much Will a Secured Credit Card Raise My Score?
Just how much a secured credit card might raise your credit score depends on how you use the card and whether you already have a credit score. People with no credit histories may look forward to an average credit score in around six months, provided they maintain responsible credit habits. If you have an existing credit history, you may see the effect of your new card’s usage in a month or two, although it might not be very pronounced.
To open a secured credit card, you will need to pay a security deposit, which distinguishes it from regular unsecured credit cards. Given the need for a security deposit, they are typically easy to get. Depending on the card you select, you might need to pay an annual fee. Some cards from this segment let you earn cash back/rewards.
One of the biggest benefits of secured credit cards is that they enable you to build your credit score even if you don’t qualify for a conventional credit card.
Pros & Cons of Secured Credit Cards
- Can help build credit
- Easier to qualify for than unsecured cards
- May be possible to upgrade to an unsecured card
- Need to provide a security deposit
- Credit limit depends on security deposit
- Might need to pay annual fees
Does a Secured Credit Card Build Credit?
A secured credit card can help you build credit, provided you use it responsibly. For example, making all your payments on time and not using too much of your credit line typically helps improve your credit score. However, a maxed-out secured card or making late payments can hurt your credit score.
People who wish to rebuild their credit need to remember that applying for a new secured card results in a hard credit inquiry, which can cause their credit score to drop. However, this slight dent is usually temporary and easy to fix if you establish good habits around using your new card.
How Long Does It Take to Build Credit?
How quickly your credit score increases and by how many points depends on the starting point and how you use your new card. Credit bureaus typically need three to six months of account activity to generate your starting credit score. So if you do not yet have a credit score, a secured card might help you get to a "fair" score in around six months.
But if you have poor credit, improving your score might take longer since you have already established a baseline credit history and will need to prove you can manage your new credit line responsibly over time.
How to Build Credit Fast Using a Secured Credit Card
The best way to improve your credit score with credit cards is to pay off your balances in full each month. By doing this, you can fully enjoy the benefits your card has to offer without paying any interest charges.
- Make payments on time. Ensure that you are making all your payments on time. Your payment history is the most influential factor in your credit score, accounting for 35%.
- Keep your outstanding balance low. If you cannot pay off your balances in full each month, keep your outstanding balance below 30% of the card’s credit limit. The amount you owe also referred to as your credit utilization ratio accounts for 30% of your credit score.
- Don’t apply for multiple cards in quick succession. Every time you apply for a credit card, your credit score drops by a few points. As a result, it’s best to wait at least six months between each new credit application. New credit accounts for 10% of your credit score.
- Get a credit-builder loan. The types of credit you have in your mix account for 10% of your credit score. With a credit-builder loan, you make payments to the lender until you repay the loan entirely, and only then do you get access to the funds.
MONEYGEEK EXPERT TIP
To build your credit quickly, you need to know what's hurting and helping your credit. Get hold of an official or unofficial copy of your credit score, see what's affecting it, and start to fix problem areas. For instance, if you don't have a diverse credit history and have never opened a credit card, now may be the time! Or, if you have a good payment history and may be helped by a better credit card utilization ratio, you could ask your credit card company for a higher limit.
— Sarah Mattie, contributing expert for MoneyGeek
When to Upgrade From Secured to Unsecured
Some credit card issuers conduct automatic account reviews to determine if secured cardholders may qualify for unsecured variants based on their payment histories and other factors. This might happen after the first six months. If your card provider does not offer automatic reviews, you may request an upgrade on your own.
If you have a secured card that charges an annual fee, you might be able to upgrade to a no-annual-fee card. Depending on your card, you might also be able to upgrade to one that offers cash back/rewards and other benefits.
Best Secured Credit Cards to Build Credit
We’ve selected the best secured credit cards to help you build credit based on parameters such as annual fees, APRs, minimum security deposit amounts, rewards and the ability to upgrade to unsecured cards.
Chime Credit Builder Secured Visa Credit Card – Ideal for people who wish to avoid hard credit pulls
The Chime Credit Builder Secured Visa Credit Card comes with no annual fees. You need to add at least $200 to your Credit Builder secured account, and the same works as your card’s credit line. You may use the money from this account to pay off your balances. You don’t have to worry about a hard credit inquiry when you apply for this card. It reports payment history to the credit bureaus TransUnion, Equifax and Experian. You pay no foreign transaction fees when you use this card outside of the U.S.
Citi Secured Mastercard – Ideal for people who need higher credit limits
You pay no annual fees to use the Citi Secured Mastercard. The security deposit you will need to provide may vary from $200 to $2,500. This card reports payment history to Equifax, Experian and TransUnion. You can also choose your due date. Using this card when traveling outside the U.S. or with international merchants requires that you pay foreign transaction fees.
Navy Federal Credit Union nRewards Secured Card – Good for earning rewards
The no-annual-fee Navy Federal Credit Union nRewards Secured Card lets you earn rewards while you’re on the path to building/rebuilding your credit. It offers 1X points per dollar on all purchases. You may redeem the points you earn as a statement credit or cash or for gift cards and merchandise. You might qualify for a higher credit limit after three months and an unsecured card after six months. It reports payment history to the top three credit bureaus. Using it outside of the U.S. comes with no foreign transaction fees.
How to Compare Credit Cards
If you wish to take advantage of the benefits of secured credit cards, it’s important to select one that suits your spending habits and needs. Not all cards have the same features, so you’ll want to carefully weigh your options.
1
Annual fees
While some of the top secured cards we’ve selected come with no annual fees, others require that you pay a nominal fee.
2
APRs
Pay particular attention to this aspect if you plan to carry forward balances from one billing cycle to the next.
3
Rewards
Some secured cards like the Navy Federal Credit Union nRewards Secured Card and the Bank of America Customized Cash Rewards Secured Card give you the ability to earn rewards.
4
Foreign transaction fees
Find out if you need to pay foreign transaction fees — particularly if you plan to use your card outside the U.S.
MONEYGEEK EXPERT TIP
MoneyGeek experts review all new and existing secured credit cards each month to arrive at the best of the lot. Our unique ranking methodology for cards made available to people with poor credit pays due attention to factors such as annual fees, APRs, credit needed to apply, cash back/rewards and late fees.
Other Questions You May Have About Secured Credit Cards
Looking at other commonly asked questions about secured credit cards can help you determine if getting one is worth your while.
Next Steps
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About Rajiv Baniwal
Rajiv Baniwal is a journalist who has been covering financial topics for over 15 years. Meticulous in his research, he provides accurate and up-to-date information. His expertise includes mortgages, loans, credit cards, insurance and international money transfers.
*Rates, fees or bonuses may vary or include specific stipulations. The content on this page is accurate as of the posting/last updated date; however, some of the offers mentioned may have expired. We recommend visiting the card issuer’s website for the most up-to-date information available.
Editorial Disclosure: Opinions, reviews, analyses and recommendations are the author’s alone and have not been reviewed, endorsed or approved by any bank, credit card issuer, hotel, airline, or other entity. Learn more about our editorial policies and expert editorial team.
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MoneyGeek has partnered with CardRatings.com and CreditCards.com for our coverage of credit card products. MoneyGeek, CardRatings and CreditCards.com may receive a commission from card issuers. To ensure thorough comparisons and reviews, MoneyGeek features products from both paid partners and unaffiliated card issuers that are not paid partners.
As a seasoned financial expert with over a decade of experience covering a wide array of financial topics, including credit cards, mortgages, loans, and insurance, I bring a wealth of knowledge to the discussion of using secured credit cards to build credit. My commitment to meticulous research and staying abreast of the latest developments in the financial industry underscores my ability to provide accurate and up-to-date information.
Now, let's delve into the key concepts presented in the article:
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Secured Credit Cards and Credit Score Impact:
- Secured credit cards serve as a valuable tool for individuals looking to build or rebuild their credit.
- The impact on credit scores varies based on factors such as existing credit history and responsible card usage.
- Individuals with no credit history may take up to six months to establish a credit score, while those with poor credit might see changes in a month or two.
-
Factors Influencing Credit Score:
- Responsible credit habits, such as making on-time payments and keeping low outstanding balances, positively affect credit scores.
- Maxing out the secured card or making late payments can harm the credit score.
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Timeline for Building Credit:
- Credit bureaus typically need three to six months of account activity to generate an initial credit score.
- Building credit is faster for those with no credit history compared to individuals with poor credit.
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Tips for Building Credit with a Secured Credit Card:
- Pay off balances in full each month to avoid interest charges.
- Make payments on time, as payment history accounts for a significant portion (35%) of the credit score.
- Keep outstanding balances below 30% of the card's credit limit to maintain a favorable credit utilization ratio.
-
Upgrading from Secured to Unsecured Credit Cards:
- Some credit card issuers may conduct automatic reviews after six months to determine eligibility for an unsecured card.
- Secured cardholders may request an upgrade if automatic reviews are not offered.
- Upgrading may lead to benefits such as no annual fees or access to cards with cash back/rewards.
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Best Secured Credit Cards:
- Examples of recommended secured credit cards include the Chime Credit Builder Secured Visa, Citi Secured Mastercard, and Navy Federal Credit Union nRewards Secured Card.
- Factors for comparison include annual fees, APRs, minimum security deposit amounts, rewards, and the potential to upgrade to unsecured cards.
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Credit Card Usage Tips:
- Consider annual fees, APRs, rewards, and foreign transaction fees when choosing a secured credit card.
- Pay attention to factors like credit limits and the ability to upgrade to an unsecured card based on individual needs.
-
Additional Considerations and Expert Tips:
- Credit-builder loans are mentioned as a way to diversify credit mix, accounting for 10% of the credit score.
- Applying for multiple cards in quick succession can lead to a temporary drop in the credit score.
- Regular credit score monitoring and addressing specific areas affecting the score are crucial for effective credit building.
In conclusion, using a secured credit card strategically can be a powerful tool for building or repairing credit, and understanding key factors such as payment history, credit utilization, and responsible card usage is essential for maximizing its benefits.
