Use a Secured Credit Card to Build Your Credit

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Use a Secured Credit Card to Build Your Credit

What is a Secured Credit Card and How Does it Help Build Your Credit?

If you’re someone with poor credit or limited credit history, you may think you’re out of luck when it comes to credit card issuers, but you aren’t! Luckily there is a credit option that may fit your current situation. A secured credit card may be just what you need to get you on the road to better credit. We are here to help you understand how secured credit cards can help build or rebuild your credit so you can get yourself on the right financial path.


What is a Secured Credit Card?

A secured credit card is just like a regular credit card, except that you use your own money as collateral rather than a financial institution loaning you the funds. You are normally required to deposit a certain amount of funds depending on the lender’s requirements and how much you can afford. This can range anywhere from $200 to $3,000. Whatever amount you deposit becomes your credit limit for the new credit card. This money is later returned to you when you close your credit card account or are switched to an unsecured credit card. The purpose of a secured credit card is to test how well you can make your payments on time and how responsible you are when it comes to paying the balance off in full.


How a Secured Credit Card Builds Your Credit History

The most important factors that are weighed when determining your credit score are your credit utilization and your payment history. Other factors include the length of credit history, types of credit used and new credit accounts opened. By using your secured credit card on a regular basis and making your monthly payments on time, you’ll start building your credit history. Another key factor in building credit is keeping your card balance low. This shows creditors that you don’t need to rely strictly on your credit cards and that you’re a responsible cardholder. A good rule of thumb is to try and keep your credit utilization to less than 30% of your overall limit.


What Should You Look for in a Secured Credit Card?

Not all secured credit cards offer the same benefits, fees, and special features so it’s important to do your research and compare offers before applying for your credit card. It’s important to look for a few signs in order to pick the best secured credit card for your financial situation:

  • Fees: Some credit cards will charge annual, transaction, or additional fees. You will want to check to make sure the secured credit card you’re interested in doesn’t come with any hidden fees. Plus, the fees shouldn’t outweigh the benefits of the card.
  • Credit Bureau Reporting: Not all secured credit cards report card activity to the major credit bureaus. If you obtain a credit card like this, it won’t be helpful toward building your credit. Be sure to find a secured credit card that will report your activity and on-time payments to help build up your credit
  • Rewards: Not all credit cards come with the same features, so you want to look for a card that offers features and benefits that appeal to you and your spending habits. At Robins Financial, our Scorecard Rewards Program allows you to earn reward points that you can build up to redeem for different products, gift cards, travel, cash back, and more.
  • Check with Your Credit Union: Credit unions are not-for-profit organizations which means we are able to offer fewer fees and lower interest rates than banks. Check with your credit union before seeking a secured credit card through another lender.


Monitor Your Credit Score

After you open and use your secured credit card and begin making your monthly payments, keep tabs on your credit score. It can take one to two months after you begin using your secured card to notice a bump in your credit score, but be patient. Remember to use your card responsibly and make your payments on time and in full. If you do that, you’re sure to see positive results in your credit score.


Next Steps

If you’re ready to start building or rebuilding your credit and feel like a secured credit card is the best step to get you on the right financial path, take these next steps to get started:




At Robins Financial Credit Union, our mission is to enhance the financial well-being of our members and community. We honor this commitment by providing educational content to help you make the most of your finances. Read our other blog articles to help you gain the financial knowledge you need to succeed.


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