Friday, November 25, 2022

How To Use Secured Credit Card To Build Credit Fast

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Discover It Secured Credit Card: Best Secured Credit Card For Cash Back

How To Use Secured Credit Cards To Build Credit (This Really WORKS!)

Overview: Earn 2% back at gas stations and restaurants for up to $1,000 in combined spend each quarter plus, Discover will match your cash back at the end of your first year. That means, if you spend $300 a month at restaurants and gas stations, you will earn $6 a month, plus $72 at the end of your first year for the Cashback Match, coming to $144.

Pros: With no annual fee and rewards to boot, this secured product offers another reason why its a good card for the long haul Discover will automatically review your account after seven months to see if they can transition you to an unsecured card.

Cons: Theres a lot to love about this card, but the regular APR is not one of them. Higher than the average APR for credit cards, which is 16.21%, the Discover it Secured Credit Cards variable APR is one of the highest among secured cards.

From our expert: The Discover it Secured card is noteworthy because it offers rewards a rarity among secured cards, says CreditCards.com Industry Analyst Ted Rossman. With no annual fee and 2% cash back* at restaurants and gas stations and 1% everywhere else, this card is a compelling introduction into the world of credit.

*2% on up to $1,000 in combined spend each quarter, then 1%

Read our full Discover it® Secured Credit Card review.

You Can Use Credit Cards To Build Credit

Using credit cards to build credit is a double-edged sword. If you wield it well, you can boost your credit and unlock doors that werent open to you previously. But if you arent so good at managing your credit cards, it can harm your credit score even more.

Its important to be honest with yourself about whether you can use credit cards responsibly, so youll be well on your way to a better credit score.

Chip Lupo Credit Card Writer

A secured card can build credit in as little as 1-6 months if you have no prior credit history. For people with bad credit, meaning a credit score below 640, it could take around 12-18 months to build fair-to-good credit with a secured card. This is assuming that you maintain a history of on-time payments and manage your finances responsibly.

Technically, you build credit every month with a secured credit card, but pinpointing precisely how fast a secured card can get you to good credit is difficult, as every cardholders situation is different. Nevertheless, you can check out WalletHubs free to see how various scenarios are likely to affect your credit score and gain a better understanding of how fast a secured card could build your credit.

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How To Properly Use A Credit Card To Build Credit

The cards listed above are designed for those with poor or no credit, which makes them a great way to practice responsible credit card use and build a credit history to be proud of. There are a few rules you will want to follow when using them to get the biggest bang for your credit card buck.

  • Ensure that your usage is reported to the credit bureaus. Reporting to all three agencies is the best situation, and many cards offer these services to TransUnion, Experian, and Equifax as another perk for cardholders. Use your card each and every month so there is new activity reported on every billing cycle.
  • Pay your balance in full each month. Even with the usually higher interest rates that these types of cards charge, you should not be concerned. You will be paying everything down to zero every 30 days, according to ReadyForZero.com. If you cant pay in full, be sure to always pay before the due date, as on-time payments account for 35% of your FICO Score.
  • Keep your inquiries to a minimum. Did you know that every time you apply for credit, you are risking an inquiry into your credit report? Over time, this can cause your credit score to fall, so only do this when absolutely necessary. You can also choose to apply for cards that use a soft inquiry and wont ding your history .
  • Keep your credit utilization low. We recommend keeping your balance below 30% of its available credit limit at all times, especially if you keep a balance from month to month.
  • Pay Off Debt And Accounts

    How to Use a Secured Credit Card to Build Credit

    Paying off student loans and other debt can help raise your credit score. One smart way to start hacking away at that debt is to make smaller, bi-weekly credit card payments vs. one monthly payment.

    Scheduling automated payments can help you pay down that credit card debt more quickly, which is one of the fastest ways you can boost your scores. And if youve got any accounts on your credit report that are in collections, lenders may settle for a lesser amount if you approach them with a plan to pay the debt back.

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    How Long Does It Take To Build Credit With A Secured Credit Card

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    In a Nutshell

    Secured credit cards are an option for people who typically donât qualify for traditional credit cards. A secured credit account allows you to establish a history of on-time payments so you can build or improve your credit report and increase your credit score. This article covers what makes a secured credit card different from an ordinary credit card, how to use a secured card to establish or build credit, and how to decide if opening a secured credit card account is a good option for you.

    Written byAttorney Paige Hooper.

    Secured credit cards are an option for people who typically donât qualify for traditional credit cards. This could be someone who is new to credit and doesn’t yet have a credit score, or those with bad credit who are trying to improve their credit scores. A secured credit account allows you to establish a history of on-time payments, which is the key to achieving a good credit score.

    This article covers what makes a secured credit card different from an ordinary credit card, how to use a secured card to establish or build credit, and how to decide if opening a secured credit card account is a good option for you.

    Pay Down Credit Card Debt

    After your payment history, your amounts owed are the most important part of your credit score calculation. But this doesn’t just mean how much debt you have overall. Creditors also want to know how much of your available credit you’re using . This is called your .

    Your utilization is determined by dividing your credit card debt by your credit card limits. For example, let’s say you have a credit card with a $1,000 balance and a $5,000 limit. The utilization rate for this card would be: $1,000 ÷ $5,000 = 0.2 = 20%.

    Credit score calculations look at both your overall utilization ratio and your ratio for individual cards. A lower utilization rate is better. In fact, an ideal credit utilization is below 10%.

    When you pay down your credit card debt your utilization rate decreases.

    For most people, the number one way to improve credit score fast is to pay down credit card balances. Once your lower balance is reported to the credit bureau, your credit score should improve. This is how to build credit fast if you have high utilization. However, this can help build credit even with moderate utilization.

    If you’re unsure how to get started, check out our guide to paying off debt.

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    Using Cards With A Built In Path To Higher Credit

    In addition to establishing good credit habits like paying your bill on time each month and keeping your credit utilization ratio low, credit-building incentives can potentially help you build credit even faster.

    If youre looking for a beginner card for credit-building, there are two common ways that credit card issuers may reward you for using your credit card wisely and paying your bill on time each month.

    First, your issuer may review your account after a designated period to determine whether youre eligible for a credit line increase. This is beneficial for credit-building because it can help lower your credit utilization ratio. A higher credit line means youll have more flexibility as you spend to stay below the recommended 30%. For example, if you start with a credit line of $200, youd reach 30% credit utilization after spending just $60 per month. But if you qualify for an increased credit line of $1,000, you can spend $300 before reaching the threshold.

    Just make sure you dont use an increased credit limit as an excuse to overspend its still important to spend only what you can afford to pay down each month to both increase your credit and avoid high-interest debts.

    Even A Small Security Deposit Can Make A Big Difference

    No Credit | Get A Secured Credit Card To Build Credit!

    When you take out a secured credit card, lenders require you to pay a security deposit. This helps protect the lender if you arent able to pay your credit card balance. Most secured cards match your credit limit to your security deposit.

    Brian T. Edmondson, founder of Bankruptcy Recovery Foundation, started to rebuild his credit after bankruptcy with a $200 security deposit on a card. But many secured cards allow you to put down even less collateral. For example, the Capital One Platinum Secured Credit Card allows you to start with a deposit as low as $49.

    In some cases, you wont even need to come up with the money in advance.The secured cards that I used did not require a security deposit upfront, Clark explained. Instead, the first statement for each card would include a fee in the amount of the security deposit. I didnt need to come up with the money until about a month later when the payment was due. It was doable because it was only $200.

    If youre looking for a higher limit, some secured cards give you the opportunity to put down a larger deposit in exchange for a larger credit line. The Discover it® Secured Credit Card allows cardholders to make a security deposit between $200 and $2,500, with a credit limit to match.

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    Use The Card But Use It Wisely

    Your credit score essentially measures one thing: how risky it is to lend you money. The higher the risk, the lower your score. Improving your credit means demonstrating that you can handle borrowed money responsibly. And that means using your secured card buying things with it, and then paying it off.

    Use the card at least once a month so that your account shows regular activity. But don’t max out the card. Use it for smaller purchases that keep you well below your credit limit. A big part of your credit score is determined by “credit utilization,” or the amount of your available credit you’re using.

    That doesn’t leave a lot of room for big purchases, but remember that the primary purpose of a secured card is to build your credit, not to bolster your purchasing power.

    How Will A Secured Credit Card Improve Your Credit

    Building your credit with a secured credit card is the same as building your credit with a regular credit card. Responsible spending is your goal you should never max out your card and only purchase items you know you can actually afford to pay for with cash. You should aim to keep your credit utilization rate low, this means you should only use a small percentage of your available limit, most financial experts say to keep your balance around 10% especially if youre trying to build your credit after past financial mistakes.

    Payment history is also extremely important when it comes to improving credit. Your payment history is the biggest contributing factor to the calculation of your credit score. If you dont make your payments on time your score will suffer greatly and since you have a secured credit card you might not get your deposit back.

    Apply Now

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    What If You Have Bad Credit

    Bad credit is a tricky problem, especially if you have any delinquencies or collection accounts. Dont lose all hope yet, a secured credit card will help you turn your financial situation around it just might take more time then you thought. There are several things you can do to help your credit improve, both while you apply for a secured credit card and after you are approved.

    • If you have other maxed out credit cards, stop using them right away.
    • Get informed about your own finances, request a copy of your credit history and find out what your credit score is.
    • Create a budget and start tracking your progress.
    • Use your secured credit card responsibly and pay it off in full and on time every single month.

    Keep in mind that secured credit cards dont affect your credit score any differently than regular credit cards so its up to you to work hard and keep committed to improving your credit and becoming debt free.

    The most important step in improving your credit whether its with a secured credit card or not, is accepting the responsibility and starting the process right away, the sooner you start the sooner youll be on your way to a better financial future. Your credit score is the heart of your financial life, treat it well and youll reap the benefits.

    Learn more about secured credit cards here, or get started with your application today.

    Rating of 5/5 based on 4 votes.

    How Can I Get A Credit Card With Bad Credit

    Use Secured Credit Cards to Build Credit

    All the cards in this review cater to consumers with bad credit. Thats a good thing in light of the following statistics concerning American consumers:

    • 11.1% have a FICO score below 550.
    • 34.8% have a FICO score between 580 and 669.
    • 22% have no FICO score.
    • 25% of low-income individuals dont know how to improve their credit scores.
    • About 20% were delinquent at least once for more than 30 days.

    These statistics help explain the demand for subprime credit cards. The importance of these cards is that they offer the easiest way to improve your credit.

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    First Progress Platinum Elite Mastercard Secured Credit Card

    • Receive Your Card More Quickly with New Expedited Processing Option
    • No Credit History or Minimum Credit Score Required for Approval
    • Quick and Complete Online Application No credit inquiry required!
    • Includes Free Real-Time Access to Your Credit Score and Ongoing Credit Monitoring powered by Experian
    • Full-Feature Platinum Mastercard® Secured Credit Card Try our new Mobile App for Android users!
    • Good for Car Rental, Hotels Anywhere Credit Cards Are Accepted!
    • Monthly Reporting to all 3 Major Credit Bureaus to Establish Credit History
    • Just Pay Off Your Balance and Receive Your Deposit Back at Any Time
    • 24/7 Online Access to Your Account
    • Nationwide Program though not yet available in NY, IA, AR, or WI ** See Card Terms.
    • Get a fresh start! A discharged bankruptcy still in your credit bureau file will not cause you to be declined.

    Build Your Credit And Earn 1% Cash Back On All Eligible Purchases1

    • Make purchases like with any credit card
    • Build your credit by making on-time payments
    • Earn 1% Cash Back on all eligible purchases1
    • Your linked savings account works as a security deposit2

    Read terms and conditions for important information about APRs, fees, eligible purchases, balance transfers and program details.

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    Moving To An Unsecured Or Regular Credit Card

    Some secured credit card lenders will allow you to convert the account to an unsecured card once your credit score is considered fair or average. In other instances, you might have to apply for an unsecured card on your own and close the secured account.

    Under either circumstance, its important that youre set up for success before making the switch. While they may come with more perks and less limitations, using an unsecured credit card can put you at risk for landing right back where you started by damaging your credit score. If you dont trust yourself to not overspend or worry you wont consistently have enough money to make payments on time, youre better off sticking with the secured card.

    First Progress Platinum Select Mastercard Secured Credit Card

    How To Use A Credit Card To Build Credit (FAST)
    • Receive Your Card More Quickly with New Expedited Processing Option
    • No Credit History or Minimum Credit Score Required for Approval
    • Quick and Complete Online Application No credit inquiry required!
    • Includes Free Real-Time Access to Your Credit Score and Ongoing Credit Monitoring powered by Experian
    • Full-Feature Platinum Mastercard® Secured Credit Card Try our new Mobile App for Android users!
    • Good for Car Rental, Hotels Anywhere Credit Cards Are Accepted!
    • Monthly Reporting to all 3 Major Credit Bureaus to Establish Credit History
    • Just Pay Off Your Balance and Receive Your Deposit Back at Any Time
    • 24/7 Online Access to Your Account
    • Nationwide Program though not yet available in NY, IA, AR, or WI ** See Card Terms.
    • Get a fresh start! A discharged bankruptcy still in your credit bureau file will not cause you to be declined.

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