Yes, secured credit cards are good for rebuilding credit because they report to the major credit bureaus every month and they’re easy to get approved for, even with bad credit. A refundable deposit is required to open a secured card account, which reduces the lender’s credit risk. As a result, secured credit cards are cheaper and more accessible than unsecured credit cards for bad credit.
Secured credit card approval is not always guaranteed, though. You may be turned down for a secured card if there are certain items on your credit report such as an unresolved bankruptcy.
Why Secured Credit Cards Are Good for Rebuilding Credit
Secured credit cards report to the major credit bureaus every month
The account information lenders report to the major credit bureaus ultimately determines your credit score, and secured cards report account info every month just like any other credit card account. Positive information that gets reported as a result of things like on-time bill payments will help offset any past credit mistakes and will strengthen a weak credit history. Of course, any adverse credit activity that’s sent to the credit bureaus could damage a shaky credit profile even further.
You can set your credit limit based on the amount of the refundable security deposit
A secured card's required security deposit can be as low as $200 or $300 in most cases, and the amount of your deposit usually becomes your credit limit. Most secured cards will also allow you to increase your credit limit by adding funds above the minimum amount. Low credit utilization is an important factor in a good credit score, so the ability to increase your credit limit can be a useful tool when you’re rebuilding credit.
Some secured credit cards don’t require a credit check
A handful of secured cards don’t perform a hard pull on your credit report when you apply. That’s a huge plus if you have bad credit because a hard pull could temporarily hurt your already-low credit score. Dicey credit history also won’t prevent you from being approved when there’s no credit check.
No credit check credit cards still report your account information to the major credit bureaus every month, so you’ll have an opportunity to rebuild your credit history, as long as you manage your accounts responsibly.
Other Helpful Tips for Rebuilding Credit
A secured credit card is only good for rebuilding credit if you manage the account responsibly. That means paying the monthly bill on time, every time and not overspending. As a rule, you should try to keep your statement balance below 30% of your credit limit.
You can also rebuild credit just by having the card and not using it, as long as the account remains in good standing. Signing on to someone else’s account as an authorized user is another option worth considering, as credit card issuers don’t perform credit checks on authorized users.
If you’re not sure whether a secured credit card is right for you, check out our editors’ picks for the best credit cards to rebuild credit, which include both secured and unsecured cards, to help narrow your search.
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