Bad Credit? Use a Secured Credit Card to Rebuild

posted on 06-07-2019

Beverly Harzog is a nationally recognized credit card expert, author, and consumer advocate. She blogs about credit cards at

I cringe when I hear credit repair "experts" tell folks they can boost their credit scores by 60 points in 48 hours... for a small fee, of course.

Unfortunately, the world of credit scoring doesn't operate that way. It takes time to improve your credit history and bump up your score. But there is a good way to add a little oomph to the tedious process of rebuilding your credit. 

Use a secured credit card responsibly and speed things up. Let's take a look at how these cards can help you.

How a Secured Credit Card Works

Here's what you do with a secured credit card: Put a deposit in an account with the bank that's issuing the secured card and this amount, in most cases, becomes your credit limit.

Now, there are some hybrid cards that I refer to as partially secured. In this case, your deposit might be, say, $200, but you'll often get a $500 (or higher) credit limit. You'll find out if you qualify for a partially secured card after your application is approved. Your deposit stays in the bank to "secure" your credit card. So be sure that you can temporarily live without that amount in your regular bank account. Some issuers will let you earn interest on your deposit, but many do not.

When you receive your secured credit card, you'll use it the same way you'd use a typical, unsecured credit card. You actually buy items on credit.

How a Secured Credit Card Can Boost Your Credit Score

If you get a secured credit card that reports to all three major credit bureaus, your payment history will show up on your credit reports.

If it isn't clear on the website or in the disclosure statements whether the card issuer reports to the major bureaus, ask the issuer. This is important: Confirm it.

Keys to Successfully Build Credit: In the Fine Print

I read the fine print for secured credit cards every week because I write credit card reviews. Yes, I know you're envious of the glamorous life I lead.

I'm telling you this because I know firsthand this stuff is painfully dull. But you have to do it. Plop yourself into a comfortable chair (not a recliner or you'll fall asleep) that's close to strong lighting.

Here are a few things to look for:

  • Security deposit: Note the minimum, which is usually at least $200, and the rules for getting your deposit back.
  • Payment holds: Lately, I've seen terms on a few secured cards that state your payments will be held seven to 10 days before they're applied to your account balance. You need to know whether this applies so you don't inadvertently go over your credit limit.
  • Annual fee: This is pretty standard. Expect to pay $29 to $49 for the best cards. But I've seen a few issuers charge around $75.
  • Variable APR: Look for a card with an annual percentage rate (APR) from 14.99% to about 23%. I've seen rates as high as 36% -- stay away from a rate like that.
  • Grace period: A common tactic is to promise a very low interest rate -- then once you're roped in, you find out there's no grace period. This means that as soon as you buy an item, it starts accruing interest.

Other "gotchas" to watch for: application fee, monthly maintenance fee, credit limit increase fees, returned payment fee and more. Really, I could go on all day. Read the fine print to protect yourself.

Tips for Using a Secured Credit Card: Do's and Don'ts

To increase your chance of success, keep these in mind:

  • Do use the card even if it's just for small purchases. You can't generate a credit score if you don't use the card.
  • Do pay your credit card bill on time.
  • Don't max out the card. Keep your credit card balance low.
  • Don't carry a balance. This is vital if you end up with a card with a high interest rate.
  • Do pay all your bills on time every month.

Using a secured credit card is an excellent way to jumpstart the rebuilding process. Be patient and before you know it, you'll see your history and your score improve. Every situation is unique, but if you don't have a recent bankruptcy or judgment on your credit report, you might qualify for an unsecured card in 12 to 18 months.

Readers like you also enjoyed:

by Christian Hudspeth What's even better than earning rewards for spending on your credit cards? Getting paid hundreds of dollars worth in sign-up bonuses in three months or sooner -- just for tr...
by Christian Hudspeth Tired of dragging credit card debt around with you? Taking 15 minutes to transfer your debt to a credit card with generous balance transfer perks could save you thousands in...
by Christian Hudspeth If you're going to spend money anyway, then why not get paid for it?Whether you're looking for credit cards with up to 6% cash back, double flight miles, or even a free hote...
by Christian HudspethIn times where interest rates are on the rise, you may start hearing financial advisors and bankers sing the praises of an income strategy called "CD laddering" (short for ce...
by Susan Campbell Those of us familiar with selling property know real estate agents don't come cheap. With real estate agent commission and fees amounting to as much as 6% of the sel...
Beverly Harzog is a nationally recognized credit card expert, author, and consumer advocate. She blogs about credit cards at Being in credit card debt is the pits. I've bee...
by Christian Hudspeth If you haven't already felt the pressure to refinance your mortgage, you're probably really feeling it now. Mortgage rates are still hovering near historic lows. But ...
by Christian Hudspeth If you or someone you know is thinking about getting a home mortgage, you may want to know about the thousands of dollars in hidden charges that some lenders are quietly...
by Christian Hudspeth Money market accounts (MMAs) and savings accounts make great places to set aside your emergency fund money and earn some interest income at the same time.Simply put, these s...
by Christian Hudspeth It's true that auto loans and home loans offer attractively-low annual percentage rates (APRs), while credit cards offer borrowing power without the risk of ever seeing the ...
by Christian HudspethWant to keep your emergency fund safe while earning interest yields that are three to five times higher than a typical savings account? Putting your money into an FDIC-insure...
by Christian Hudspeth Question: Hi there. I need your advice. I'm only 19 and I really need to start investing. Where can I start? -- Tirelo M., Gaborone, Botswana Answer: You've defini...