If you properly manage your secured credit card, you could see a 200-point increase in your credit score within 12 months. If you have bad credit, a score in the 500s or below, opening three secured credit cards and a credit builder loan can get you into the 700s within 12 months.
The potential for a credit score increase will only happen if you make on-time payments every month and if you keep your credit utilization ratio low. You’ll also need to do a good job of managing the other aspects of your credit as well.
How much your credit score will increase and how fast will depend on what your credit score looks like and the factors that are currently bringing your score down.
For those starting with no credit, credit score gains may initially be fast and substantial. In as little as 3 months, you can go from having no score to a credit score in the 600s.
For those with poor credit, improvements to your credit score may be slower at First, but by the 12-month mark, the change will be much more significant.
On the other hand, if you fail to manage this secured card properly, or poorly manage the other credit lines on your credit reports, your credit score may not improve at all.
How Do Secured Credit Cards Help Build Credit?
A secured credit card account can help you build your credit in multiple ways. For instance, let’s say that you are just starting on your credit journey and have only a loan account reporting (i.e. student loan). Qualifying for an unsecured credit card may be difficult, so you decide to start with a secured card.
You put a $500 security deposit down in exchange for a $500 credit limit.
If you pay your statement balance in full and on time every single month, this will provide a boost to the payment history portion of your score, which has the the biggest impact on your credit score (35%).
Next, you decide to only charge your $50 water bill to the card each month. This gives you a utilization rate of only 10%, which is the ideal level for maxing out the credit utilization part of your score.
How many points does a secured credit card give you?
AROUND 200 points!!
The number of points a secured credit card can raise your credit score depends on several factors including your unique financial situation.
If you properly manage your secured credit card you could see a 200 point increase to your credit score within 12 months.
If you in case you have bad credit a score in the 500s or below opening three secured credit cards and a credit builder loan can get you into the 700s within months.
Secured credit cards to build credit
Even if you have no credit history or a low credit score, a credit card might be more attainable than you think.
Secured credit cards are an accessible way to build or repair your credit, and some even provide solid rewards without an annual fee. However, you’ll need to offer up a refundable security deposit to establish your credit limit.
1. Secured chime credit builder visa credit card
2. Discover it secured credit card
3. Self-credit builder account with secured Visa credit card
4. Opensky secured a Visa credit card
5. First progress platinum elite mastercard secured credit card
6. Capital one quicksilver secured cash rewards credit card
7. First progress platinum prestige MasterCard secured credit card
Getting a credit card can be a major step toward bolstering your credit history and credit scores. Using a credit card responsibly — that is, keeping the utilization ratio low and paying balances on time and in full — can elevate your scores and unlock lower rates on insurance, car loans, and mortgages. In short, a good credit score is kind of a big deal when it comes to this adulting thing.
Any credit card can help you build credit, but you’ll want to pick the card most suited to your spending habits and lifestyle. And once you figure out what card that is, you’ll want to give yourself the best chance of being approved for it.
But with so much riding on having good credit, and with so many cards on the market, it can be hard to start the process of getting a credit card.
How to Pick the Best Credit Card for You: 4 Easy Steps
1. Check your credit
Find out what credit card offers you might be eligible for by checking your credit score. The better your score, the greater your chance of being approved for cards with better perks.
2. Identify which type of credit card you need
There are three general types of credit cards:
1. Cards that help you improve your credit when it’s limited or damaged.
2. Cards that save you money on interest.
3. Cards that earn rewards.
The best card for you is one with features designed to meet your specific needs. If you don’t travel much, for example, then the best travel card in the world isn’t going to do you a lot of good.
3. Narrow your choices by asking the right questions
1. Will this card help me build my credit?
Look for a card that reports your credit card payments to the three major credit bureaus. Many secured cards don’t do this.
2. How much does it cost to open an account, including the annual fee?
The rewards on these cards generally aren’t high enough to warrant an annual fee. Unless you have very poor credit, you can likely avoid this expense. For secured cards, the lower the security deposit, the better, although your credit limit may be tied directly to how much of a deposit you make.
3. Can I graduate with a better card later on?
Choose a card that will let you build your credit and upgrade to a card with more competitive terms. This makes it easier to leave your card open longer, boosting your average age of accounts in the long run.
4. Apply for the card that offers you the highest overall value
Narrowing your choices is the easy part, but deciding between two or three similar cards can be quite difficult. If you’ve already found a clear winner after Step 3, go with that one. If not, it’s time for a tiebreaker round.
Look closely for differences. All other values being equal, here are some factors that might set a card apart.
For student and secured cards:
1. Credit limit automatically increases. Certain cards let you increase your limit after a few consecutive on-time payments.
2. Interest is paid on your deposit.
Some secured cards place your security deposit in an interest-earning CD. This way, you can earn a small amount of money on it.
4 Ways a Credit Card Might Increase Your Credit Score
When you open a new credit card, the credit card issuer will likely report the account to the three major credit bureaus. Once the card appears on your credit reports, it can impact your credit scores in several ways.
Payment History
One of the primary factors that impact your credit score with FICO and VantageScore is how you pay your bills. Payment history accounts for 35% of your FICO Score. Adding accounts to your credit report and paying them on or before the due date could help you build credit over time Credit Utilization.
Another factor that can have a significant impact on your credit score is your credit card utilization rate (aka the relationship between your credit card limits and balances). If your credit report shows that you use a low percentage of your card limits, your credit score could benefit from this good habit.
Adding a new credit card with a zero balance to your credit report may lower your overall credit utilization rate as well. This credit utilization calculator can help you crunch the numbers.
Length of Credit History
At first, a new credit card might hold you back in this credit score category since older accounts are better where the length of credit history is concerned. But as your credit card accounts age, they could help your credit score improve.
Also, if you have a friend or family member add you as an authorized user on an older credit card account, you could potentially see some fast credit score improvement. Just make sure that the account has no late payments or low credit utilization, and that the card issuer reports authorized user accounts to all three credit bureaus.
Credit Mix
Credit scoring models like to see that you have experience managing different types of accounts. With FICO, 10% of the score comes from the “Credit Mix” category of your credit report. So, if your credit report doesn’t have revolving credit cards and you open one, your credit score might improve when the account shows up on your report.
Credit Utilization
Another factor that can have a significant impact on your credit score is your credit card utilization rate. If your credit report shows that you use a low percentage of your card limits, your credit score could benefit from this good habit.
Adding a new credit card with a zero balance to your credit report may lower your overall credit utilization rate as well. This credit utilization calculator can help you crunch the numbers.
Bottom Line
A credit card could help your credit score if you use it responsibly. But if you start to struggle with overspending or any other bad credit card habits, address the problem right away. Otherwise, that credit card account that had the potential to help your credit score might have a negative impact instead.
