How To Build Credit With A Secured Credit Card (2024)

Simply building credit should not be your goal when you open a secured credit card. Your aim should be to buildgoodcredit. That isn’t something that happens automatically.

These action steps will help you build the type of healthy credit that can unlock bigger and better opportunities for you in the future.

Determine the Best Secured Credit Card for Your Situation

There’s a slew of secured credit cards to choose from, all with varying terms. And some are less valuable than others. For example:

• Many secured cards do not earn rewards on purchases. Unless there are extenuating circ*mstances, you shouldn’t have trouble receiving at least 1.5% back on your purchases. Some cards, such as the U.S. Bank Cash+® Secured Visa® Card*, even offer up to 5% cash back on select purchases.
• Some secured cards incur an annual fee. These cards often don’t provide anything extra for this fee but instead are generally even more lenient about who can apply. As an example, the OpenSky® Secured Visa® Credit Card charges a $35 annual fee but doesn’t even run a credit check.
• Some secured cards don’t offer the opportunity to upgrade to a proper credit card once you’ve established your credit. That means you’ll have to cancel the card if you want your deposit back—which will temporarily ding your credit score.

Look for an upgradeable no-annual-fee secured credit card that possesses a rewards program. You can find plenty of them by reading our guide to thebest secured credit cards.

Pay Your Bill on Time

Payment history accounts for 35%of your overall credit score. The single most important activity you can do to foster a healthy credit score is pay your bill on time. You don’t even have to pay the full amount. As long as you make your minimum payment each month, you’re gold.

Obviously, you should pay your card in full. Carrying a balance month-to-month means you’ll rack up interest (which is nightmarishly high on secured credit cards—sometimes nearly 30%). If you think you’ll be making purchases that you can’t pay off monthly, you’re probably not ready to dive into the world of credit.

Keep Your Amounts Owed Low

Yourcredit utilizationaccounts for 30% of your credit score. Credit utilization is the ratio of the amount you owe in relation to your available credit. For example, if you have a $3,000 credit limit and you’ve currently got a balance of $1,000, your credit utilization is 33%.

The perfect credit utilization is debatable. Credit bureau Experian reports that you should at least keep your amounts owed below 30%. To that end, you may want to pay off your card multiple times per month.

It’s also a good idea to put as large of a deposit as you can (or as much as the specific secured credit card will allow) in order to score the biggest credit line. If you go with the minimum (which can be as little as $49), you’ll have an extremely difficult time keeping your credit utilization below 30%.

Spend on Your Card

Dovetailing with the previous point, your credit utilization should not always be 0%. The reason you’ve got a secured credit card is so that you can prove to the credit world that you can be responsible with spending and paying your bills. If your credit indicates that your secured credit card has been living in a sock drawer, your card issuer could even close your account.

If you’ve got absolutely no credit history, you should find yourself with a FICO credit scorein as little as six months after opening a secured credit card. You’ll likely be able to open unsecured credit cards that are more rewarding and have superior benefits around the one-year mark. Many secured cards allow you to graduate to an unsecured credit card after 6-12 months of on-time payments.

If you’ve already got a credit history but you’re simply trying to improve it from past mistakes, it could take quite a while for you to cultivate a respectable credit score depending on your current number. Credit scores are a measure of how you use credit over time. You’ll need a lengthy streak of good credit habits before your previous missteps are atoned for.

Having multiple secured credit cards is not necessary to build good credit, and there is nothing intimating that you’ll achieve a good credit score faster by doing so.

However, opening more than one secured credit card can help you in one important way: credit utilization. Remember, this factor makes up a whopping 30% of your credit score. If you want to increase your available credit to free you up to spend a little bit more without your credit score getting dinged, this could be a way to go.

Whether your credit journey is just beginning or you’re trying to repair your credit to its former glory, a secured credit card is one of the most powerful options at your disposal. It’s similar to a prepaid card—but it reports to the credit bureaus.

You’ll have to deposit money to the issuing bank as collateral, and they’ll give you a credit line equal to your deposit. Once you either cancel or upgrade your card to an unsecured option, you’ll get your deposit back.