How to Build Credit with a Secured Credit Card

How to Build Credit with a Secured Credit Card

A secured credit card is a credit card with a limit that is directly proportional to the amount of money put down as a security deposit for the card. Secured credit cards are often use by those with poor credit or no credit history in order to build or rebuild credit. Follow these steps for how to use a secured credit card to build credit.

Search for lenders that offer secured credit cards. Many lending institutions offer secured cards, which may come with a variation of different fees and a wide range of interest rates. Shop around for the best deal, keeping the following in mind:

Choose a card with minimal fees and the lowest interest rate possible.
Always read the fine print before applying for a secured credit card so that you fully understand the terms and conditions before committing.
Be sure to ask the credit card company about graduating from a secured to an unsecured account. Many lenders will lift your security deposit requirement and return your security deposit once you’ve made a certain number of timely payments.

Apply for a secured credit card. Once you choose a bank, complete the credit request form, sign the necessary documents and submit the deposit as per the bank’s instructions.
Secured Credit Card

Follow these best practices when using your secured credit card in order to improve your credit score:

Pay your credit card balance off every month. Not only can you avoid paying interest this way, but you can also rebuild bad credit or build a credit history more quickly.
Pay your bill on time every month.
Increase your credit limit when you can by depositing more into your security deposit account. Try to obtain a credit limit that is representative of your ability to make large monthly payments. Just remember not to overstep what you can realistically afford to pay, or the card that you got in order to rebuild bad credit could make your credit even worse.
Keep your balance low. No matter what your credit limit is, be sure to maintain as low a balance as possible.
Only keep your secured credit cards as long as you have to. Secured cards typically come with relatively high interest rates and are therefore not your best option once you build credit enough to get an unsecured card with a lower interest rate.
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