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    Rebuilding Bad Credit - How A Secured Credit Card Can Help

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    If you’re trying to improve your credit score, one of the best ways is to use a lending product -  and use it wisely.

    Still, that’s easier said than done when a low score is preventing you from qualifying for a credit card.

    Getting out of this catch-22 situation is easier with a secured credit card.

    This category of borrowing product was created specifically for bad credit customers.

    In this article, we’ll take a closer look at secured cards and how you can use one to boost your score.

    What Is A Secured Credit Card? 

    Traditional credit cards are unsecured – meaning that you don’t need to provide collateral to receive one.

    Unfortunately, they also require you to have a credit score in the mid to high 600s at a minimum in order to qualify.

    • A secured credit card is almost the same as a regular one except you’ll need to pay a deposit before you can start using it.
    • Your credit limit will usually be somewhere between 50% and 100% of the deposit.
    • You still need to make your monthly payment on time and pay down your balance just as you would with a regular card.
    • Each on time payment you make will be reported to the major credit bureaus. As your credit score improves over time, you may be able to upgrade and apply for a traditional unsecured credit card.

    How To Use It To Rebuild Credit 

    Your FICO score is calculated according to certain factors – and two of the most important ones are credit utilization and payment history.

    A secured credit card can help you improve your score by influencing both of these factors positively.

    • If you pay your credit card balance on or before the due date, this positive information will be reported to the credit bureaus. In time, this will help your score increase as long as your other credit accounts are all in good standing.
    • Your credit utilization (the percentage of your total credit limit that you have currently used) accounts for 30% of your FICO score. If you pay down your balance in full each month, you should see an improvement in your credit score.

    What To Look Out For 

    A secured credit card can help you improve your creditworthiness - but there are a few things you need to bear in mind before you apply for one. 


    Virtually every financial product comes with a schedule of fees and secured credit cards are no exception.

    You’ll want to compare the fees and interest rates associated with each card on your shortlist before you apply.

    • Secure credit cards require a deposit. This is a type of fee that’s not usually associated with traditional credit cards. You may need to pay a deposit of between $100 and $500  depending on the credit limit on each specific card.
    • There may also be annual fees, application fees, and other costs involved in opening the account. You’ll want to check these and choose the product that’s most affordable given your present financial circumstances.

    Make Sure The Creditor Reports To One Of The Three Major Bureaus 

    As we outlined above, the main reason why secured credit cards improve your FICO score is that they report positive payment behavior to Equifax, Experian ,and TransUnion.

    While not every card issuer reports to all three bureaus, it’s essential to choose a lender that reports to at least one of them.

    • Before you apply for a secured credit card, you can always contact the issuer and ask them which of the bureaus they share your payment history with. If a card company doesn’t report your payment history, you’ll want to strike it off your list because it simply won’t help improve your credit score.

    Be Careful Not To Create Debt 

    One of the main reasons why people have lower credit scores to begin with is that their current debt obligations have become overwhelming.

    A secured credit card gives you a fresh start in managing your  repayments.

    • You can build your credit score by paying the full balance on time every month and not letting any amounts carry over. 
    • The financial discipline you gain from a secured card can help you lay the foundation for a higher credit score and put you on the path to financial freedom.


    A secured credit card is an excellent option for borrowers who want to increase their credit scores.

    You’ll need to pay a deposit for this kind of card, but the qualifying criteria are far more accommodating for borrowers with bad credit.

    As you make regular payments on your card and your credit score improves, you can gradually transition to an unsecured credit card either from the same lender or different card company.

    Most importantly, you need to verify that the card issuer reports to at least one major credit bureau to ensure your payment progress is reflected to maximize the benefits of a secured card.