Secured Credit Cards: The Best Way to Build Credit from Scratch
If you're new to credit or rebuilding after financial difficulties, a secured credit card is often your best first step. These cards are designed specifically to help people establish or rebuild credit.
What Is a Secured Credit Card?
A secured credit card requires a refundable security deposit that typically becomes your credit limit. For example, if you deposit $500, you'll have a $500 credit limit.
How Secured Cards Build Credit
When you use a secured card responsibly:
- The issuer reports your activity to credit bureaus
- On-time payments build positive payment history
- Low utilization improves your utilization ratio
- Your credit file gains account age
Choosing the Right Secured Card
Look for:
- Reports to all three bureaus
- No annual fee (or a low one)
- Path to graduation to an unsecured card
- Reasonable minimum deposit ($200-$500)
- Rewards if available
Top Secured Cards to Consider
- Discover it Secured - No annual fee, cash back rewards, auto-reviews for graduation
- Capital One Platinum Secured - Low deposit options, automatic upgrade path
- Chime Credit Builder - No deposit required, no fees
- OpenSky Secured Visa - No credit check required
How to Use a Secured Card
Follow these best practices:
- Keep utilization under 10%
- Pay balance in full each month
- Never miss a payment
- Use for small, recurring charges
- Don't close when you graduate
When to Expect Results
With responsible use:
- 3 months: You may see initial score improvement
- 6 months: Score typically increases noticeably
- 12 months: Many cards offer graduation to unsecured
The Path to Unsecured Credit
After 6-12 months of responsible secured card use, you may qualify for:
- Unsecured version of your secured card
- Entry-level rewards cards
- Store credit cards
- Credit-builder loans