How Much Will A Secured Credit Card Raise My Score? Answer Inside

Need to build credit and thinking about getting a secured card? We answer just how much will a secured credit card raise my score?

Updated April 2024
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Fact checked by Cathy Gresham
how much will a secured credit card raise my score

If you’re looking to improve your credit score, a secured credit card may be a viable option. However, before you jump in, it’s crucial to understand what a secured credit card is and how it works. You also need to know how it can impact your credit score and the factors that influence your credit score.

In this article, we’ll explore all these aspects and more.

Understanding Secured Credit Cards

Are you struggling to get approved for a credit card due to poor credit or no credit history?

A secured credit card could be the solution you’re looking for.

In this article, we’ll explore what secured credit cards are, how they work, and how they differ from unsecured credit cards.

What is a Secured Credit Card?

A secured credit card is a type of credit card that requires a cash deposit, which serves as collateral for the credit limit. Because the deposit mitigates the risk, secured credit cards are easier to obtain than traditional, unsecured credit cards. They’re often used by people who are trying to build or improve their credit scores.

People with poor credit scores, a lack of credit history, or previous credit problems are among the most common users of secured credit cards.

But why do secured credit cards require a deposit? The answer is simple: to protect the lender (that’s the credit card issuer, in this case) in case you can’t pay back your debt. If you fail to make your payments, the bank can use your deposit to cover the outstanding balance. This makes secured credit cards less risky for lenders, which is why they’re more willing to approve applicants with a less-than-perfect credit history.

How Do Secured Credit Cards Work?

When you open a secured credit card, you must deposit money into an account with the issuing bank. The deposit typically ranges from $200 to $2,000, depending on the credit limit you want. Your credit limit is usually equal to or slightly less than the amount of your deposit. In other words, if you deposit $1,000, you’ll likely have a credit limit of $1,000.

As with a regular credit card, you can use a secured credit card to make purchases. Each month, you’ll receive a statement showing your balance, minimum payment, and due date. You must make at least the minimum payment by the due date, but it’s best to pay the full balance to avoid interest charges.

One of the benefits of using a secured credit card is that it can help you establish a credit history or improve your credit score. By making your payments on time and keeping your balance low, you’re demonstrating to lenders that you’re a responsible borrower. Over time, this can lead to better credit offers and lower interest rates.

If you fail to make the minimum payment on time, the bank may withdraw the money from your deposit account. However, if you consistently make your payments on time, the bank may increase your credit limit, eventually, refund your deposit, or upgrade you to an unsecured credit card.

Secured vs. Unsecured Credit Cards

One significant difference between secured and unsecured credit cards is that secured credit cards require a cash deposit, while unsecured credit cards do not. Additionally, unsecured credit cards typically offer higher credit limits, better rewards, and lower fees than secured credit cards.

However, if you have poor credit or no credit history, it can be challenging to get approved for an unsecured credit card. Secured credit cards can help you establish a credit history and improve your credit score. With responsible use, you may be able to upgrade to an unsecured credit card in the future.

It’s important to note that not all secured credit cards are created equal. Some may have high fees or interest rates, so it’s essential to shop around and compare your options before applying. Look for a card with a low annual fee, reasonable interest rate, and minimal fees.

In conclusion, secured credit cards can be a useful tool for building or improving your credit score. By using your card responsibly and making your payments on time, you can establish a positive credit history and increase your chances of getting approved for other credit products in the future.

14% of credit cards are secured

How Secured Credit Cards Impact Your Credit Score

Secured credit cards are a type of credit card that requires a cash deposit as collateral. The deposit serves as a guarantee that you’ll pay your bills on time. Secured credit cards are often used by people with no credit history or a bad credit history who want to improve their credit score.

Establishing a Positive Payment History

One of the most significant impacts of secured credit cards on your credit score is their ability to help establish a positive payment history. By consistently paying your bills on time, you’ll demonstrate to lenders that you’re a responsible borrower, which can improve your credit score over time. This is especially important if you’re new to credit or have a history of missed or late payments.

It’s important to note that making just the minimum payment on your secured credit card won’t do much to improve your credit score. You’ll need to pay your balance in full every month to see a significant impact on your credit score.

Reducing Credit Utilization

Secured credit cards can also help lower your credit utilization ratio. Your credit utilization ratio is the amount of credit you’re using compared to the amount you have available. For example, if you have a $1,000 credit limit and a $500 balance, your credit utilization ratio is 50%.

A high credit utilization ratio can negatively impact your credit score, so it’s important to keep your balance low. By using your secured credit card sparingly and paying your balance in full every month, you can reduce your credit utilization ratio and improve your credit score.

Increasing Length of Credit History

If you’re new to credit, a secured credit card can help you establish a credit history. By making on-time payments and building a positive payment history, you can increase the length of your credit history, which can improve your credit score.

The length of your credit history accounts for 15% of your credit score, so it’s important to start building credit as soon as possible. Secured credit cards are a great way to do this, as they’re often easier to obtain than traditional credit cards.

Diversifying Types of Credit

Secured credit cards can also help you diversify the type of credit you have. Having a mix of credit types, such as a credit card and car loan, can improve your credit score. This is because lenders like to see that you can handle different types of credit responsibly.

If you only have a car loan, getting a secured credit card can help you diversify your credit types and improve your credit score. Just be sure to use your secured credit card responsibly and pay your bills on time.

In conclusion, secured credit cards can have a positive impact on your credit score if used responsibly. By establishing a positive payment history, reducing your credit utilization, increasing the length of your credit history, and diversifying the types of credit you have, you can improve your credit score over time.

You can graduate from a secured card to an unsecured one after building a strong credit history

Factors Affecting Your Credit Score

Having a good credit score is important for many reasons. It can affect your ability to get approved for loans, credit cards, and even rental applications. Your credit score is calculated based on several factors, which we will discuss below.

Payment History

Your payment history accounts for 35% of your credit score. It reflects your willingness and ability to pay your debts on time. Making your payments on time is crucial to maintaining a good credit score. Late payments, missed payments, and defaults can all have a negative impact on your credit score.

If you do miss a payment, it’s important to catch up as soon as possible. Late payments can stay on your credit report for up to seven years, so it’s best to avoid them altogether.

Credit Utilization

Credit utilization, or the amount of credit you’re using compared to the amount you have available, accounts for 30% of your credit score. Using too much of your available credit can lower your credit score. It’s recommended to keep your credit utilization ratio below 30%.

If you’re using a lot of your available credit, it may be a sign that you’re relying too heavily on credit. This can be a red flag for lenders, as it indicates that you may have trouble paying back your debts.

Length of Credit History

The length of your credit history accounts for 15% of your credit score. Your credit history is the length of time that you’ve had active credit accounts. A longer credit history can indicate a more responsible borrower and thus result in a higher credit score.

If you’re just starting out with credit, it can be difficult to build a long credit history. However, there are steps you can take to start building credit, such as getting a secured credit card or becoming an authorized user on someone else’s credit card.

Types of Credit

The type of credit you have accounts for 10% of your credit score. Lenders like to see that you can handle different types of credit, such as a credit card, a car loan, and a mortgage. Having a mix of credit types can help improve your credit score.

If you’re new to credit, it’s important to start building a diverse credit portfolio. This can help you establish a good credit history and improve your credit score over time.

Recent Credit Inquiries

The number of recent credit inquiries, or the number of times that a lender has pulled your credit report, accounts for 10% of your credit score. Applying for credit too frequently can indicate that you’re a high-risk borrower and lower your credit score.

It’s important to be selective when applying for credit. Each time you apply for credit, it can have a small negative impact on your credit score. However, if you’re shopping around for the best interest rates, it’s okay to have multiple inquiries within a short period of time.

By understanding the factors that affect your credit score, you can take steps to improve your creditworthiness and maintain a good credit score. Remember to make your payments on time, keep your credit utilization low, and maintain a diverse credit portfolio.

A secured credit card can help raise your credit score if you use it responsibly

While everyone’s situation is different and context matters a lot so it’s impossible to give a precise number, by establishing a positive payment history, reducing your credit utilization, increasing the length of your credit history, and diversifying the type of credit you have, you can boost your credit score over time. However, it’s essential to remember that a secured credit card is not a quick fix for improving your credit score. It takes time, dedication, and responsible financial habits to see long-term results.

If you’re looking for ways to raise your credit score you may want to check out our related article which addresses: Can I Build Credit with a Store Credit Card?

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Editor's Note:

At Personal Finance Guru, we want to help you maximize your lifestyle through personal finance. You can trust the integrity of our independent financial advice. Our opinions are our own and have not been provided, reviewed, approved, or endorsed by any advertiser or financial product provider. To support and grow the site, however, we may receive compensation from the issuers of some products.

Meet the author:

Cody Beecham

Cody Beecham

Founder/Owner/Editor/Author

Cody is the founder and owner of Personal Finance Guru. His day job is as a management consultant at one of the Top 3 firms (think Mckinsey, Bain), where he advises Fortune 500 C-suite clients on their most important and pressing business problems. He completed his business education at Harvard Business School. 

After seeing the lack of personal finance education for regular people, Cody started the website with the mission to provide everyone access to information that will help them achieve their financial goals.

Cody approaches personal finance from a maximalist perspective, shunning typical advice around simply not buying a cup of coffee instead of more effective methods like investing in yourself to quickly grow your income. 

He believes in saving money and investing for the future, but he also knows that you need to enjoy life today. That’s why Cody approaches money with a sense of humor and a positive attitude. He knows that if you’re not having fun while you’re growing your wealth, then what’s the point?

Cody approaches life with the same gusto that he brings to personal finance. He loves to travel and experience new cultures, and he is an avid reader and learner. He also enjoys playing sports (especially tennis) and spending time with his family and friends.