How Long Does It Take To Build Credit With A Secured Card
A secured credit card can help you build credit if you have a limited credit history or a low credit score. Either of those factors may make it difficult to qualify for a standard, unsecured credit card. When you apply for a secured card, you make a deposit to guarantee your credit line. This lowers the lender’s risk, because they can use your deposit to cover what you owe if you’re unable to make payments.
You use a secured card the same way you do an unsecured card, purchasing goods and services on the account and making payments each month. If you’re applying for a secured card, check to see that the card issuer reports your payment activity to one or more of the consumer credit bureaus . The The OpenSky® Secured Visa® Credit Card, for example, reports payments to all three credit bureaus, helping you build credit across all your credit reports. Lenders will use both your credit report and credit score to evaluate your future credit and loan applications. Payment history is the most important factor in your credit score, so having a history of on-time payments on your secured card can help you improve your credit score and secure future loans or credit cards.
Even with a secured card, there’s really no quick fix to building or repairing credit. The goal with a secured card is to establish a record of on-time payments and keep your balance low. As you do so, you’re likely to see your credit improve.
Watch Your Fico Score
Your FICO® Score is one of the factors that many credit card issuers may look at when deciding whether youre ready to graduate from your secured credit card. Hopefully, your secured credit card usage has made a positive impact on your credit.
Your FICO® Score is determined by evaluating five categories, weighted in the following percentages for the general population:
- Payment History, approximately 35 percent: How long a track record you have of paying your past credit accounts on time
- Amounts Owed, approximately 30 percent: How much total debt you owe and the amount of available credit you are using
- Length of Credit History, approximately 15 percent: How long you have been borrowing money.
- New Credit, approximately 10 percent: How recently you have applied for new loans or credit cards
If you are building credit for the first time, you probably do not have a lengthy credit history or much of a credit mix, so this means that the other factors like your payment history are even more important to your FICO® Score.
Since your payment history carries the most weight in calculating your FICO® Score, being late with credit payments can be a big problem. Paying your bills on time during every month that you have your secured credit card, and managing your secured credit card account responsibly, can help keep your FICO® Score under control and qualifying to graduate to your next credit card. See more details and terms about FICO® Scores at the bottom of this article.
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The Difference Between A Secured And An Unsecured Card
The main difference between secured and unsecured credit cards is that secured cards require you to send the card issuer a refundable deposit when you open your account. Generally, your deposit determines your card’s credit limit, and many secured cards have minimum and maximum security deposit limits of around $200 to $3,000 .
Because the deposit removes some of the risk of loss to card issuers, it’s often easier to get a secured credit card. But aside from the security deposit, there’s no difference in how secured and unsecured cards work. You can use both types of cards to make purchases and either pay off the balance in full each month or pay down the balance over time. With both you also need to make at least the minimum monthly payment to avoid late fees and hurting your credityour card issuer won’t take your minimum payment out of your deposit if you have a secured card.
If you miss too many consecutive payments, the card issuer may close your account and send your account to collections. With a secured card, the issuer can also keep your security deposit to offset what you owe.
Functionality aside, you may find that secured cards and unsecured cards that don’t require good credit have less favorable terms than other credit cards. Many have annual fees, and some charge credit limit increase, monthly maintenance and application fees. You also won’t find many rewards cards that don’t require you to have at least fair credit.
Other Ways To Help Your Credit On Your Way To Discover It Secured Credit Card Graduation
There are other habits you can start that may help your credit score as you work to make the switch from a secured credit card to an unsecured card.
In addition to regularly meeting your minimum monthly payment, there are several other ways to help your credit score on the path to making a secured Discover card upgrade. Your payment history is the most important factor as it makes up about 35% of your FICO® Score.
Paying down credit card debt, or making more than the minimum monthly payment, can further help your credit score. Your amounts owed, including your revolving utilization ratio is the second-biggest factor of your FICO® Score, making up about 30%.
Opening new credit accounts only when needed can positively impact the length of your credit history, which makes up about 15% of your FICO® Score.
New credit and credit mix each account for about 10% of your FICO® Score. Limiting the number of accounts you open in a short period can help your credit score as every hard credit inquiry can cause your credit score to decrease. Having a balance between installment debt, like loans, and revolving debt, like credit cards, can help your credit score.
Following these tips can help you become a secured credit card graduate.
If you prefer not to receive your FICO® Credit Score just call us at 1-800-DISCOVER . Please give us two billing cycles to process your request. To learn more, visit Discover.com/FICO.
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Converting To An Unsecured Card With A Different Provider
Switching to an unsecured card with another provider simply requires you to find an unsecured option youre eligible for that fits your needs. Look for one that offers perks like rewards or credit toward the things you love in life.
After youve narrowed down an unsecured card that youre interested in, hold off on closing your secured account until approval. That way, youll better balance the overall age of your credit history and your credit utilization while you apply for your new card.
Generally, be wary of secured credit card providers offering a higher credit limit for staying with them. Theres no reason to keep a secured credit card after youve improved your credit score enough for an unsecured one.
What Depends On You
Before you can move up from a secured credit card to a good unsecured card, your credit needs to be in somewhat decent shape. The point of getting that secured card was to build a track record of responsible behavior that will be reflected in your credit score. To build credit with a secured card:
Use the card regularly. Put one or two purchases on it each month.
Keep your balance low. Don’t go over 30% of your credit limit. Staying under 10% is even better. Your ability to use credit without using all your credit is key factor in your credit score.
Pay on time and in full. Your payment history is the single biggest factor in your credit score, so never pay late. Err on the side of paying early, even. And paying in full prevents you from being charged interest.
Practice good credit habits elsewhere. Pay all your bills on time. Bills that go into collections can end up on your credit report and undo all the work you’re doing with the secured card.
Once your credit score rises into the “fair” or “average” range generally defined as a score of 630 to 689 your chances of approval for an unsecured card get better.
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Transitioning To Unsecured Credit
Many credit card companies convert your secured credit card to an unsecured card after one or two years of timely payments. Even if you cant convert your secured credit card, you may get approved for an unsecured credit card with another creditor after 12 months of on-time payments.
If you apply for a credit card and get denied, avoid putting in more applications. This makes you look desperate for credit. Instead, continue making timely payments on your secured card and apply again within six months. You’ll get a letter from the credit card issuer explaining why you’ve been denied and you can use this information to decide what you should do next.
Use Secured Credit To Change Your Credit History
Most bad credit comes as a result of poor payment history. You can demonstrate better payment habits, even when you cant get credit the traditional way, by getting a secured credit card. You cant prove a renewed ability to make timely payments until you have a new credit card.
Before you apply for a secured credit card, make sure the creditor reports to at least one of the three major credit bureaus. If not, the card wont benefit you in terms of re-establishing your credit because future creditors wont see your good payment history. If the card issuer doesn’t report your payments to the major credit bureaus, it won’t be included in your credit report or reflected in your credit score.
After youve been approved, remember that your purpose for the new secured credit card is to build a positive credit history. That said, dont use the card to create debt. Instead, use your secured credit card to make small purchases that you can pay in full each month. If you cant afford to pay for a purchase, dont charge it.
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Deciding If Its Time To Change Cards
How To Improve Your Odds Of Graduating To An Unsecured Card
The point of a secured card is to build or rebuild your credit. To improve your eligibility odds for unsecured cards with perks and rewards programs, youll need to use your secured card carefully. Heres how to do that:
Make sure your card activity counts: Opt for a card that reports your account activity to the three major credit bureaus.
Pay your bills on time , every time: Your payment history accounts for 35% of your FICO scores, and late payments can result in steep fees. Many secured cards charge high interest rates, so paying your bill in full can help you avoid expensive credit card debt.
Try not to max out your cards credit limit:, or the portion of your total credit limit you charge each month, accounts for 30% of your FICO score. We recommend you only use 30% of your total credit limit during a billing cycle.
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How Can Credit Cards Help Your Credit
Credit scoring models don’t care whether you have a secured or unsecured cardand either type of card can impact your credit in several ways. A credit card can help your credit scores because:
- You can add positive payments to your credit history. Making your monthly payments on time is one of the best things you can do for your credit scores. A long history of on-time payments can be a key to having excellent scores.
- It increases your available credit. Credit scoring models compare your card balances and credit card limits to determine your . Only using a small portion of your card limits can be good for your scores, which may be easier when you have more available credit.
- It may “thicken” your credit file. Having no credit accounts can make you unscorable, and only having a few accounts may result in a thin file. A new credit card can help you establish credit, or show you can manage multiple accounts.
- It can improve your credit mix. Having experience with both loans and credit cards can help your credit scores. If you don’t already have a credit card, opening a new card may add to your and help your scores.
If you want to use your card to build credit, making one small purchase each month and then paying the bill in full could be a good approach.
How Much Will A Secured Credit Card Raise Your Credit Scores
Exactly how much a secured credit credit card will help you raise your credit scores depends on your own unique circumstances. And those same factors that can affect how long it takes to improve your scores can affect how much your scores improve, too.
Keep in mind: A credit card wonât build credit or improve your credit scores for you. Itâs your responsible use of the card that can help you build credit.
As you work on building your credit, it may help to use a tool like to see where you stand. CreditWise gives you access to your free TransUnionÂ® credit report and weekly VantageScore 3.0 credit score anytime. And using it wonât hurt your scores.
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Is A Secured Card Right For Me
Secured credit cards are much easier to qualify for than regular unsecured cards, because of the deposit the bank holds against it. So that makes them a great first step for people who are buildingor rebuildingtheir credit.
Issuers of secured credit cards will regularly report on your credit activity to the three big credit reporting agencies. That means your good credit behavior, like paying your credit card bills on time, will steadily improve your credit score.
Beyond that, secured cards offer the same convenience as regular credit cards. They make it easier to make in-store purchases you can use them online and you can say goodbye to carrying your checkbook around.
Example Of A Secured Credit Card
The Discover it Secured Card is one of the most popular secured cards on the market. Discover generally accepts borrowers in the “fair” credit categorythat is, those with a credit score in the 580-670 rangealong with borrowers who have a minimal credit history. The minimum security deposit required to open the account is $200, and the maximum credit limit can be up to $2,500, depending on your income and the ability to pay. After eight months, the account is reviewed to see if it qualifies for transfer to an unsecured card, at which time the borrowers deposit can be refunded.
The Discover it Secured Card offers numerous cashback rewards and has no annual feejust like unsecured Discover cards. It carries a variable APR of 22.99%, as of February 2021.
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Get Matched With Your Next Card
If you’re unsure of which card to get, a side-by-side comparison can help. You can use Experian CreditMatchTM to compare cards from our partners. After logging in, you can also get matched with cardswhich can help you determine which cards you may qualify for based on your credit profile. You can also use an Experian account to monitor your credit. If you can use your new card to improve your credit scores, you may be able to qualify for better cards in the future.