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How to Build Credit with a Secured Credit Card

Ready to improve your credit scores? Laura answers credit questions from podcast listeners and readers. She explains what a secured credit card is, where to find one, and how to use the account to build or repair your credit no matter your situation.

By
Laura Adams, MBA,
Episode #437

Where to Find the Best Secured Credit Card

I received a note from Bobby H. who says, “What are your thoughts on secured credit cards, and if you approve of them, where’s the best place to apply for one?”

I hope this article has shown why I wholeheartedly recommend using a secured credit card to build credit. But as I previously mentioned, they’re not all the same.

Here are several secured cards that report payment information to the major credit bureaus and have low fees:

The Best Strategy for Using a Secured Credit Card

The best best strategy for using your secured card is to make small purchases (less than 20% of your credit limit) that you pay off in full each month. If you follow this strategy, the interest rate on a card doesn’t matter because you’ll never pay it.  

The best best strategy for using your secured card is to make small purchases (less than 20% of your credit limit) that you pay off in full each month. If you follow this strategy, the interest rate on a card doesn’t matter because you’ll never pay it.  

The result will be a positive credit history and higher credit scores that allow you to qualify for credit cards and loans at the best possible terms.

If for some reason you can’t get approved for a secured card that reports to the credit bureaus, don’t let that stop you. Look for an issuer that converts secured accounts to regular ones after you demonstrate responsible use after a period of time, such as six or 12 months. That’s another way to build credit.

A secured credit card is like riding a bike with training wheels—a great way to start, but not a long term solution. Your goal should be to get a regular, unsecured card as quickly as possible since it allows you to build the strongest credit history and gives you the most conveniences for your purchases. 

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Macro shot of credit card image courtesy of Shutterstock

 

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