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Four Steps to Raising Your Credit Score With A Secured Credit Card

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Most people would not think of getting a new credit card to boost their credit score, but I have to tell you that this is really how it works.

Step 1

Understanding What Is A Secured Credit Card?

A "secured credit card" is a Visa or MasterCard where you have made a cash deposit into the account at your bank or financial institution against which your credit card charges are deducted. That's a huge mouth full of information, so let me try to say it in simpler terms.

A secured credit card is a lot like a debit card with one major exception. Both require you to deposit funds into them, but to the credit reporting agencies the secured credit card transactions are treated like normal credit card transactions. When those transactions are reported to the credit reporting agencies, it will help to build your credit score. Debit card purchases are not considered charges by the credit reporting agencies and do not positively effect your credit score.

If you have adverse credit reporting information on your credit report and it is adversely affecting your credit score, then having a secured credit card that you are making the payments each month on time (and in full if possible) will help to off-set those adverse credit report items.

Step 2

Do I Need a Secured Credit Card?

Anyone with less than excellent credit with a score below 630 who has been denied an unsecured credit card, someone with no credit at all, or someone with a bankruptcy on their credit report should be using a secured credit card. This is the most productive and fastest way to rebuild credit.

  • Credit-score from 830-730 very low risk.
  • Credit-score from 730-630 low risk.
  • Credit-score from 630 medium risk.
  • Credit-score from 630-430 high risk.
  • Credit-score from 430-330 very high risk.

Step 3

Which Secured Credit Card Is Best?

It is overwhelming how many different options are out there when it comes to choosing the secured credit card that is right for you.

When choosing a secured credit card you should look for the following:

  • It should have a small or no annual fee. Do not choose a company that has a large application fee.
  • Make sure the card you are considering reports to all three major credit reporting companies. It defeats the entire purpose of rebuilding your credit if the positive information you are generating is not being reported to all the agencies.
  • Check to see that the company you are considering using also has unsecured credit cards available so that when you have established your credit worthiness, your cash deposit will be refunded to you and your previously secured card will become an unsecured credit card. When you reach this point, you are well on your way.

Step 4

How Can I Use the Secured Credit Card to Raise My Credit Score?

Make sure you make your credit card payment on time each and every month, even do it early each month if possible. Even one late payment will have devastating effects on an already tarnished credit score.

Additionally, pay off the balance each month if you can. Remember, this is your money and you are in effect, paying yourself back for the previous months purchases.

Use my advice wisely and watch your credit score rebound and clime in no time at all.

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