How to Rebuild Your Credit Score with Secured Credit Cards

Your credit score is one of those chicken and egg type of problems. If you want a good credit score, you need to show you’re a responsible user of credit. But to do that, you need to have lines of credit – loans, credit cards, etc.

Buuuuut to get loans and credit cards, you need to have good credit. Yikes!

If you have no credit, you can establish a credit history by getting a store branded credit card, which often has lower credit requirements. Stores like giving you those cards because it’s been shown that people spend more on credit. You have no history, which isn’t ideal, but it’s better than having a bad history.

But if you have bad credit, improving or rebuilding that credit is much harder. Many places won’t give you a credit card if you have bad credit.

So what do you do?

You’ll have to get a few secured credit cards, demonstrate good credit behavior, and wait for your credit to increase.

Table of Contents
  1. How Secured Cards Work
  2. How Secured Cards Build Credit
  3. The Best Secured Credit Cards

How Secured Cards Work

A secured card is like a regular credit card except you need to give a security deposit. The amount of that deposit will be based on your creditworthiness. The amount you deposit will also determine your initial credit line.

The deposit will sit in a separate account, usually earning zero interest, and it acts as collateral in case you fall back to your poor credit ways. That lets the bank cover themselves in case you become a risk but until then they will give you a line of credit.

It functions just like a credit card. You can use it anywhere you’d use a credit card, you make payments on it every month, and there is a credit limit. The only difference is that you have to make a refundable security deposit. Over time, some cards will give you higher credit limits if you make regular payments.

What’s nice about some secured cards is that you get a lot of the same benefits as credit cards – like fraud protection, extended warranty, travel assistance, auto rental insurance, etc.

How Secured Cards Build Credit

Secured cards are credit cards too – they’re simply “secured” by your security deposit. The card is, for all practical purposes, just like a credit card.

To rebuild your credit you need to do two things:

  1. Make on-time payments! That’s pretty much the ball game – your credit score is a measure of your ability to repay your debts. You don’t have to pay off the entire balance (though that’s better than paying interest), you just have to make all the payments on-time. Do not miss one or be late!
  2. Use the card. If you open the card and never use it, that won’t help either. You need to charge something to it, pay it off, and show you can go through the steps of being a responsible user of credit.

You should see a credit score increase in 6-12 months of good behavior. Eventually, once your scores improves enough, you can graduate an unsecured credit card.

You can use credit score simulators to see what the effects of various actions may have on your credit score. Here are a few to try

The Best Secured Credit Cards

First, it may be worth checking to see if you can get a credit card meant for FICO scores of 500 – 599. They have looser credit requirements and might be a good fit.

I recommend the Capital One Platinum Secured Credit Card or the Citi® Secured MasterCard®. These are two major card issuers, the MasterCard is accepted nearly everywhere, and neither will gouge you with fees – which are common with some secured card issuers.

The Capital One Platinum Secured Credit Card is their for people rebuilding credit and has no annual fee. The refundable security deposit can be $49, $99, or $200 depending on your credit and that will result in a credit limit of $200 to $3,000 depending on how much you deposit. Best of all, you will automatically be considered for a higher credit limit in as little as six months with no additional deposit needed. This is a solid card with no transaction fees (unless it’s a cash advance, which you should never do).

If you can’t get these cards, let me tell you how to evaluate a secured credit card because there are some scams out there:

  • Watch all the fees. Card companies know that if you have bad credit, you have few options. So a lot of secured cards will be full of fees. An annual fee is almost a given (which is why I recommended the Capital One card – it has no fee, nearly unheard of) but you’ll also have transaction fees for each time you use it. Avoid those cards unless you have absolutely no choice.
  • Make sure the card reports information to the credit bureaus. Some cards don’t extend you any credit and are simply glorified gift cards – do not use those. Double check that the card will help you build credit by reporting your activity to one of the three major credit bureaus (Equifax, Experian, TransUnion).

Here’s a list of cards that might also fit the bill. I haven’t vetted all of these but it’s a good list to start your research.

Finally, keep these credit score apps on your phone so you can monitor your score.

Good luck!

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About Jim Wang

Jim Wang is a forty-something father of four who is a frequent contributor to Forbes and Vanguard's Blog. He has also been fortunate to have appeared in the New York Times, Baltimore Sun, Entrepreneur, and Marketplace Money.

Jim has a B.S. in Computer Science and Economics from Carnegie Mellon University, an M.S. in Information Technology - Software Engineering from Carnegie Mellon University, as well as a Masters in Business Administration from Johns Hopkins University. His approach to personal finance is that of an engineer, breaking down complex subjects into bite-sized easily understood concepts that you can use in your daily life.

One of his favorite tools (here's my treasure chest of tools,, everything I use) is Personal Capital, which enables him to manage his finances in just 15-minutes each month. They also offer financial planning, such as a Retirement Planning Tool that can tell you if you're on track to retire when you want. It's free.

He is also diversifying his investment portfolio by adding a little bit of real estate. But not rental homes, because he doesn't want a second job, it's diversified small investments in a few commercial properties and farms in Illinois, Louisiana, and California through AcreTrader.

Recently, he's invested in a few pieces of art on Masterworks too.

>> Read more articles by Jim

Opinions expressed here are the author's alone, not those of any bank or financial institution. This content has not been reviewed, approved or otherwise endorsed by any of these entities.

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  1. Athena says

    The Capital One credit card has helped me tremendously with rebuidling my credit after some medical debt mistakes. I also had luck with getting store credit cards and just paying them off quickly. This may have led to some shopping fun. 😉

  2. Dominique @ Money Goody says

    Great article, and I’m just going to reiterate the point about not missing payments because it really is the most important step. Luckily I’ve been able to build pretty good credit but if I was in a position where it wasn’t so great, I’d definitely look into a secured credit card to build it back up.

    • Jim Wang says

      It’s basically the ONLY step (after getting credit) – miss a payment and it’ll kill your score.

  3. Kate@TaxOptimizedInvestment says

    Thank you for the post, Jim. When I first moved to America, I did not have a credit history. I opened a secured credit card with Bank of America. It helped me build my credit history. Now I have moved on to credit cards with higher sign on bonus or cash reward.

  4. Esmeralda M Trevino says

    I am trying to rebuild my credit after a financial hit in 2017. How many secured credit cards should I have? Or How many do your recommend?

    • Jim Wang says

      You don’t need a lot, one or two is enough. You want to show activity on the card(s) and a relatively low (under 10% is great, 10-20% is good too) utilization of your total credit.

  5. Mose Calloway says

    Credit One took a chance on me. They gave me a $300 card, Took annual fees and so on out of it. I`ve had it for 6 months. After Credit One took me on, Merrick Bank gave me a card for $550. I now have both cards, trying to rebuild my credit. I have not missed a payment.I am thinking about asking Credit One for a “limit increase”.

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