Building Credit For The First Time Using A Secured Credit Card: Six Months To Your First Credit Score
If youâve never used credit before, you might not have a credit report at all, or you might have a credit report that doesnât contain much information. In either case, the first step to attaining a credit score is opening a credit account. When youâre new to credit â for example, if youâve never taken out a loan or had a credit card â it can be challenging to know how to begin. Because secured credit cards are typically available to people with poor or nonexistent credit, they can be a good starting point for establishing a positive credit history.
When youâre approved for a secured credit card, the account will typically appear on your credit report within a month. If you donât already have a credit report, opening the secured credit card account will trigger the creation of a credit file for you.
Your First Credit Score
FICO is the most widely used credit scoring model. It pulls information from your credit report to generate your credit score, but you wonât get your first score from FICO until youâve had an open account for at least six months. In other words, after two or three months of using your secured credit card, youâll probably have a credit report, but not a FICO score. Although FICO dominates the credit scoring scene, there are other credit scoring models, such as VantageScore, that use different models to generate credit scores.
Improving Your First Score
How Does A Secured Credit Card Work
Once you have a secured credit card, you can use it like any traditional credit card. Once you’ve established a history of good credit , your card may be upgraded to an unsecured card, and your security deposit released. If you have Navy Federal’s nRewards® Secured credit card, after just 3 months, you could be eligible for an upgrade that includes additional credit to allow for spending beyond your deposit.
How Much Should I Spend Using My Secured Card
You should aim to keep your secured card balance below 30% of your available credit limit. This is because the second largest factor that impacts your credit score is your credit utilization rate: the amount of credit youve spent out of the total credit available to you. High credit utilization can hurt your credit score. We will let you know when you hit a credit utilization rate above 30% so you can make a payment towards your balance, ensuring your credit score is not negatively impacted.
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How To Make The Most Of A Secured Credit Card
Now that you understand how secured credit cards work, how do you handle one correctly? There are several things to keep in mind. It may take some reminders to get into the routine, but once youve established the right habits, proper credit card practices can become second nature. Heres some tips on how to make your secured card work for you and improve your credit score:
If youre able to consistently keep up with these tips, you should have no problem growing your credit score with a secured credit card. Most secured options report your habits to the three credit bureaus, so demonstrating good behavior like these is the best way to improve your credit.
What Is A Secured Credit Card And How Does It Work
Editorial Note: The content of this article is based on the authors opinions and recommendations alone. It may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.
When you have bad credit, or no credit history at all, it can be nearly impossible to get approved for a traditional credit card. But that doesnt mean youre out of options. Getting a secured credit card, which requires a security deposit, is a great way to start building a strong track record of good credit.
Well examine what secured cards are, how they work and how one can help improve your credit score.
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Re: How Long Does It Take To Get A Capital One Secured Card
I am in the same boat! I funded my account on the 27th of February! Called in on the 13th because I received a very confusing letter stating as if my security deposit had not posted. Welp the lady confirmed that the deposit was received on the 2/27 and today I received an email stating that my card has been mailed. Umm today marks 2.8 weeks like this is ridiculous. I am on the phone right now as I type. Mind you I have Credit One card, a Merrick Bank card and I have an authorized user on my mom Cap One card. Guess what guys! My other Cap One took 5 days yall!
How To Open A Secured Credit Card
If youre as serious about rebuilding credit as we are, we recommend applying for a UNITY Visa Secured Card.
It comes with a fixed rate, access to our How to Rebuild Credit Program and reporting to the major credit bureaus, so you can see your efforts paying off when your credit score starts rising.
You may think avoiding another credit card is the best thing to do when you want to rebuild credit, but thats not always the case. Consider opening a secured credit card. If you place limited funds on it, use it sparingly and pay it in full each month, this credit card can easily help you rebuild your credit.
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How Long Does It Take To Improve My Credit Score
After opening a secured credit card account, it will take around one to two months for the secured credit card issuer to report it to a major credit bureau, at which point it will begin impacting your credit report and your credit score. Then it takes several additional months before the account’s activity is substantial enough to make a difference.
If you maintain a low or $0 balance and manage the rest of your finances well, you could raise your score several hundred points in a year or two, but it’ll depend on your particular situation. If you have a longer credit history with a number of issues, it will take longer. If you have a shorter history, each month’s activity will play a much larger role.
How Fast Can A Secured Credit Card Help My Credit
A secured credit card can help you build credit if you use it to make small purchases and pay the balance in full on or before the due date each month. This shows creditors that you’re able to responsibly manage your debts. Your credit score could also benefit if you pay on time, as payment history accounts for 35% of your FICO® Score. Keeping the balance low is another credit booster because it helps your credit utilization, which is the second most important component of your credit score.
There’s no set time frame for how long it takes for a secured credit card to help you build credit. But opening an account and making timely payments can add positive information to your report that will benefit your score and possibly help improve it over time.
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Pay Off Your Balance In Full Each Month
The best way to use a secured credit card is to do so responsibly. To avoid paying interest, pay off your balance in full each month. Doing so also keeps your credit utilization rate, or the amount of available credit you’re using, low, Griffin says.
“Your utilization rate, or balance-to-limit ratio, is the second most important factor in credit scores after payment history,” Griffin says. “The lower your utilization, the better, as it shows you’re not relying too heavily on your available credit.”
Because it’s important to show activity on your card, consider using the card for small purchases and pay them off that month. Or you can use your card to pay for a small, recurring bill, such as a streaming subscription service.
Factors To Consider When Choosing A Secured Credit Card
Your choice in credit card should be based on your personal goals and finances. To start, consider that youll have to submit a cash deposit up front that can range from a few hundred dollars to several thousand. Think about your monthly expenses and determine what sort of credit limit makes the most sense for you while factoring in how much your budget allows for. If your card limit is on the lower end of the spectrum and your routine purchases eat up the majority of your available credit, understand that this type of high usage can hurt your credit score. In these situations, a high limit secured card may be a better option.
Aside from spending habits, youll also want to take into consideration any applicable rates and fees such as annual fees and foreign transaction fees, as well as any additional benefits. Though its rare, some secured cards do offer rewards, such as the Discover it® Secured Credit Card.
When it comes to selecting a secured credit card, here are a few things you should be particularly wary of:
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How Does A Secured Card Work
Secured cards are issued by most well-known credit card companies and banks. Similar to a credit card, you have to apply for a secured card. Once youre approved, you can use your secured card for things like buying groceries or for booking a vacationeveryday expenses that you can repay immediately.
How Long Does It Take To Receive A Credit Card In The Mail
Thereâs no single answer for how long it takes to receive your credit card in the mail, either. It depends on the issuer and the postal service. But many issuers, including Capital One, say you can expect to receive your card in the mail within 7 to 10 days of being approved.
Keep in mind, if youâre approved for a secured card, youâll have to fund the deposit before the card ships.
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Secured Credit Cards Vs Prepaid Debit Cards
Prepaid debit cards seem similar to secured credit cards. You have to pay money before you can use the card, and they typically have a Visa, MasterCard or American Express logo.
But with prepaid debit cards, you’re using your own money to make purchases not money borrowed from the issuer. You load money onto the card, then the issuer uses that money to pay for your purchases.
Since these cards don’t extend any credit, account activity isn’t reported to the credit bureaus. Therefore, you’re not building a credit history by using a prepaid card. Prepaid debit cards can also have fees that secured credit cards do not.
If building credit is your goal, a secured credit card is really your best bet.
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What’s The Difference Between A Secured Credit Card And A Prepaid Debit Card
With a secured credit card, you’re using credit, even though it’s funded by your deposit. Your credit card usage and payment activity will be reported to the credit bureaus, which can help boost your score over time.
Prepaid debit cards look like credit cards, even down to the Visa or Mastercard logo, but they aren’t credit cards. With a prepaid debit card, you’re not using credit when you buy something. Instead, you load up the card with your money before using it. Since there’s no credit involved, the debit card company doesn’t report to the credit bureau, and you don’t build up your credit file.
Prepaid cards may help you stick to a budget, but they won’t actively help you improve your credit.
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How Fast Will A Secured Card Rebuild Credit
If youre trying to rebuild your credit, a secured credit card can be a helpful tool. But how long does it take to build credit with a secured card?
The answer depends on a few factors, including how much debt you have and how often you use your card. Heres what you need to know about how long it takes to build credit with a secured card.
If you have bad credit, or no credit history at all, it can be tough to get approved for a traditional unsecured credit card. Thats where secured cards come in. Secured cards require a deposit, which acts as collateral in case you default on your payments. Because of this security deposit, issuers are more likely to approve people with bad credit for a secured card.
Once youre approved for a secured card, its important to use it responsibly. That means making on-time payments and keeping your balance low relative to your credit limit. If you can do this, you should start seeing an improvement in your credit score within six months to a year.
Of course, the speed at which your credit score improves will also depend on other factors, like whether you have any late payments or collections on your record. The good news is that even if you have some negative marks on your credit history, using a secured card responsibly can help you turn things around.
What Happens To Your Credit Score After Opening A Credit Card
If youve never borrowed money from a lender or used a to make purchases, there may not be enough information in your credit report to generate a credit score. But when you start making payments, your issuer might report to one or all of the three major credit bureaus.
So where exactly does your credit score come from? Think about when you were in school and you did a paper, says Rod Griffin, senior director of public education and advocacy for Experian. The paper is like the credit report, and the teacher is kind of like the lender, and they evaluate the information in the report and assign a grade. The grade is kind of like a credit score.
Now, imagine that you have hundreds of teachers evaluating the same paper, because you dont have just one credit score. Based on a variety of different scoring models, you have hundreds of different credit scores. Your FICO scores are the most important, however theyre used by 90% of top lenders to evaluate your creditworthiness.
You can expect to wait at least six months for a FICO score after opening your first credit card.
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Increase The Amount Of Security Deposit
Contact customer service or log on to your secured cards website to start the process. Provide your name, address, account number, date of birth, Social Security Number and any other information need to verify your account. Please note that some credit card issuers require that you make additional deposits, up to the maximum amount allowed, before the account opens.
Check with the issuer to make sure your deposit is within the secured cards limits. Some of the best high limit secured credit cards, such as the U.S. Bank Secured Visa® Card, allow security deposits of around $5,000. . The First Tech Federal Credit Union Platinum Secured Mastercard® also stands out, as it allows approved applicants to make refundable security deposits of up to $25,000.
Secured Vs Unsecured Credit Cards
An unsecured credit card is a credit card that doesn’t require you to deposit money in case you don’t pay your balance. When people think of a traditional credit card, they have an unsecured card in mind.
A traditional credit card typically doesn’t require you to put down a deposit and it usually has a higher credit limit. But it will also have a higher credit score requirement. Many traditional credit cards also come with rewards and other incentives.
In some cases, you can upgrade your secured card to a traditional credit card after demonstrating a pattern of responsible credit habits.
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What To Do If The Card Doesnt Arrive
If a new or replacement card doesnt arrive within the expected timeframe, its best to contact support by phone or online. Some issuers offer an online status check expectant account holders can use to get more information.
When contacting the issuer, try asking these questions:
- Is the mailing address correct? An incorrect address could be the reason why a card hasnt been received yet.
- Can the card be expedited? If the mailed card was lost or stolen, ask if the next shipment can be expedited. There may be a fee.
- If there are bank branches nearby, can they issue a temporary card? A temporary card can be used to make purchases until the new card is activated.
Choose The Right Secured Card
When shopping for a secured card, you’ll want to look at the credit limits and security deposit requirements. And just like when you’re hunting for a standard credit card, the APR and fees should also be taken into account. The fees include annual fees and miscellaneous charges such as late or returned payment fees.
On top of your deposit, some secured cards will ask for a fee when opening your account. “Shopping around for the best rates and terms can help you save money in the long run,” says Griffin.
You’ll also want to see if a card offers you the option to upgrade to a traditional credit card or if it will increase your credit limit at some point. To qualify, you usually need to demonstrate responsible financial habits and have your card open and active for a set amount of time.
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