Do secured credit cards help build credit?

You can build credit with a secured credit card in as little as 1 month, but it will take many months or even years to build a consistently good or excellent credit score. The length of time also depends on whether you’re building credit from nothing or rebuilding damaged credit. If you have no credit, you could see a good score after just a few months of paying on time. You’ll have a … read full answerVantageScore after 1 month and a FICO Score after 6. With bad credit, though, it will probably take 12-18 months of responsible use for you to move up to the fair credit range. Secured credit cards are great for building credit because they are easy to get and report to the credit bureaus just like unsecured cards.

But it's hard to give you an accurate estimate of how long it will take to build credit with a secured credit card without knowing the details of your situation. That’s where WalletHub can help. Just sign up for a free account, and we’ll give you a personalized credit analysis that will tell you what to improve and give you a better sense of how long it will take.

Here’s how long it takes to build credit with a secured credit card:

• If you have no credit, it will take 1 month to get a VantageScore and 6 to get a FICO score. Depending on how responsibly you use your card, your first score could be anywhere from bad to good.
• If you pay your bill on time and otherwise manage your finances responsibly, you can rebuild from a bad credit score (300-639) to a fair credit score (640-699) in approximately 12-18 months.
• A good credit score based on limited information could easily fall due to an increase in credit utilization or a single missed payment. Building and then keeping a good or excellent credit score requires consistency over time. This is a project measured in years.
• For people rebuilding credit, it will take 7-10 years for some negative information, like bankruptcies and late payments, to disappear from your credit report. But the older they are, the less impact they will have on your score.

If you’re looking to rebuild your credit, secured credit cards are the best way to do it. They’re easy to get and are indistinguishable from unsecured cards aside from the deposit requirement.

Rebuilding credit will take a while, so it’s best to get started as soon as possible. Some good behaviors to practice are always paying on time and using less than 30% of your available credit.

Checking your credit reports regularly for errors and disputing any you find is also important.

The best secured credit card to rebuild credit is the Capital One Platinum Secured Credit Card because of its low deposit requirement and $0 annual fee. The deposit is $49, $99 or $200, depending on your credit standing, but you’re guaranteed a $200 credit limit.

Another good option is the OpenSky® Secured Visa® Credit Card. It doesn’t even require a credit check when you apply, which makes it great for rebuilding really bad credit. Or, if you want to enjoy some perks while you rebuild, Discover it® Secured Credit Card is a rare secured card with rewards. You get 1 - 2% cash back on your purchases.… read full answer

To be clear, all major secured credit cards can help you rebuild your credit. They all report account information to the major credit bureaus every month. And all those with low annual fees and low deposit requirements are in the running for the top spot. But the Discover it Secured Credit Card, Capital One Platinum Secured and OpenSky cards each bring something special to the table.

Best Secured Credit Cards to Rebuild Credit

Choosing the best secured credit card to rebuild credit is only the first step toward actually rebuilding. You must also use that card responsibly month after month so that positive information flows to the credit bureaus. Regularly adding positive information to your credit reports gradually covers up negative records from the past.

Your card will report positive information as long as you pay your bill on time every month. Using less than 30% of your spending limit each month or paying multiple times per month can help too. But if you really want to rebuild your credit, you’ll need to get the rest of your finances in order as well. That means paying down debt, catching up on past-due accounts and steering clear of collections accounts.

The main difference between a secured credit card and an unsecured credit card is that secured cards require you to place a refundable security deposit when you open your account. Apart from this security deposit, secured and unsecured credit cards aren't necessarily better or worse for your credit. The amount of this deposit typically serves as the credit limit for the secured card, which means you have to pre-pay for purchases with a secured card. You’ll usually have to put down the deposit when you apply, and you’ll get it back when you close your account or upgrade to an unsecured credit card. Unsecured credit cards, on the other hand, give access to a credit line that isn’t “secured” with a deposit.… read full answer

There is no difference between secured and unsecured credit cards when it comes to building credit. All major secured cards report account information to the major credit bureaus on a monthly basis, just like unsecured cards. In fact, you can’t tell secured and unsecured cards apart on a credit report. So as long as you use either type of card responsibly, your credit score will improve.

Below, you can get a better feel for the differences and similarities between secured and unsecured credit cards by seeing how they compare in several important categories.

Secured vs. Unsecured Credit Cards: Key Differences

Approval Odds of Secured Credit Cards vs Unsecured Credit Cards

Secured credit cards are easier to get approved for than unsecured cards. Because you’re technically pre-funding your credit line with a secured credit card, you can’t spend more than you can afford to repay. The deposit is held in an account by the card issuer, so if you don’t pay your bills, the deposit is used to cover the cost. That’s why secured credit cards are able to offer nearly-guaranteed approval to people with bad credit, while charging very reasonable fees. That being said, secured credit cards are real credit cards – they have interest rates, and you have to pay your monthly bill on time.

In contrast, unsecured credit cards tend to be harder to get, because the card issuer takes on a lot more risk by extending an unsecured credit line. In other words, you can spend more on an unsecured card than you can afford to repay. There are unsecured credit cards for people of all credit levels, but if you have bad credit, you’re likely to pay high non-refundable fees for a very small line of unsecured credit.

Choosing Between Secured & Unsecured Credit Cards

Overall, the toughest decision between secured and unsecured credit cards comes when you have damaged credit. With bad credit, it’s harder to get approved for an unsecured credit card, and the unsecured options available to people with bad credit are far less attractive.

If you have limited, fair, good or excellent credit, you should be able to start with a solid unsecured card. If you’ve got bad credit and the flexibility to choose either a secured credit card or an unsecured one, always go secured. It will cost you a lot less in the long run and help you build credit just the same. You can check your credit score for free on WalletHub to see where you stand.