Secured credit cards do build credit, as all major secured cards report account information to at least one of the big three credit bureaus every month. That gives you the opportunity to add positive info to your credit report, which is the key to building credit. Whether the credit that you build with your secured card is good or bad depends on your ability to pay the bills on time. You can also build credit just by having a secured card open, even if you don’t use it to make purchases.
A secured card will build credit for you as soon as the first month after you open it. That’s when information about the card may show up on your credit report, perhaps giving you a report for the first time. Credit scores are based on credit reports, and some models can produce a score with as little as one month of data.
If you use a secured credit card irresponsibly, maxing it out or missing payments, you’ll have negative information on your credit report. That can lead to a bad credit score. But on the flip side, responsible use of a secured card builds credit just as well as any unsecured card. The only difference between a secured card and an unsecured card is that secured cards require a security deposit and give you a credit limit equal to that deposit. Secured and unsecured cards look the same, both physically and on credit reports.
Here’s how secured cards build credit:
- All major secured credit cards report to 1-3 of the major credit bureaus on a monthly basis.
- Secured credit cards report information about your payment history, balance, spending limit and more to the credit bureaus each month.
- The information secured cards report to the bureaus contributes to your credit history.
- Responsible use of a secured card results in positive information being reported, helping to cover up past mistakes or build out a thin file.
- The key to building credit with a secured card is to never miss a due date, or to just never use your card. As long as your account is open and in good standing, you’re in good shape.
- Keeping your statement balance below 30% of your credit limit will help you build credit faster with a secured card.
Secured cards are the best credit cards to use if building credit is your main objective. And they’re particularly useful for rebuilding credit after mistakes. Not only do secured cards report to the credit bureaus, but they also approve even applicants with bad credit. Some don’t even do a credit check. And secured cards are known for low fees. The high approval odds and low fees are all because of the refundable security deposit.
But just because all major secured credit cards can help you build credit does not mean they’re equally attractive. They differ in several important areas, including their annual fees, minimum deposit requirements and rewards. It’s important to shop around and pick the best card for you.
Best secured credit cards to build credit with:
- Capital One® Secured Mastercard®
Discover it® Secured
OpenSky® Secured Visa® Credit Card
Citi® Secured Mastercard®
To learn more, check out our guide on how secured cards work.