The Ultimate Guide to Credit Cards
Wednesday, September 28, 2022

How Much Will a Secured Credit Card Raise My Score?

How Much Will A Secured Credit Card Raise My Score

credit card advice

John Ulzheimer

Written by: John Ulzheimer

John Ulzheimer

John Ulzheimer is an expert on credit reporting, credit scoring, and identity theft. The author of four books on the subject, Ulzheimer has been featured thousands of times in media outlets including the Wall Street Journal, NBC Nightly News, New York Times, CNBC, and countless others. With over 30 years of credit-related professional experience, including with both Equifax and FICO, Ulzheimer is the only recognized credit expert who actually comes from the credit industry. He has been an expert witness in over 600 credit-related lawsuits and has been qualified to testify in both federal and state courts on the topic of consumer credit. In his hometown of Atlanta, Ulzheimer is a frequent guest lecturer at the University of Georgia and Emory University's School of Law.

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Edited by: Lillian Guevara-Castro

Lillian Guevara-Castro

Lillian brings more than 30 years of editing and journalism experience. She has written and edited for major news organizations, including The Atlanta Journal-Constitution and the New York Times, and she previously served as an adjunct instructor at the University of Florida. Today, she edits all CardRates content for clarity, accuracy, and reader engagement.

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Advertiser Disclosure

If you’ve done any research on how to build or rebuild your credit, you’ve undoubtedly stumbled across online forums or blogs that indicate that secured cards are a practical approach in that endeavor. As with most of these credit-building strategies, there’s a little bit of myth and truth circulating the web.

So, exactly how much will a secured card increase credit scores?

A Secured Card Doesn’t Guarantee a Specific Credit Score Increase

Consumers have lots of credit-building tools at their disposal. But if there were a trifecta of tools to help earn consumers good credit scores, it would include:

It’s true that opening one or more secured credit cards will likely populate your credit reports with new, positive data. Paying your bill on time every month can help increase your credit score because payment history accounts for 35% of your FICO credit score.

That can certainly be helpful, especially for lenders with policies that reward you for having good information on your credit report.

But from a usage perspective, you’re limited to the credit limit established by the deposit you made with the lender. That means you don’t have a very impressive credit limit, and for good reason. You don’t want to tie up thousands of dollars of your cash simply to get a secured credit card with a larger credit limit. 

Even modest use of a secured credit card can lead to unmanageable debt if you’re not careful. And, if you know anything about credit scoring models, you know they don’t reward you for having credit cards with large balances. In that respect, secured cards can work against you.

Secured Cards and Collateral

In consumer lending, the term “secured” indicates that some sort of asset was provided to back the extension of credit. The asset secures the extension of credit and, thus, helps protect the lender in cases of default.

Mortgages, home equity style loans, and auto loans are examples of secured extensions of credit. In those examples, houses and cars act as security for the lender. 

When you signed all of your loan paperwork, you pledged those things as security for the lender. If you were to default on a mortgage or an auto loan, you’d lose your home or your car.

The same thing holds true for secured credit cards. But instead of pledging some physical asset, you’re pledging money.

Unsecured vs. Secured Cards

With secured credit cards, the card issuer asks you to make a deposit in exchange for a new card with a credit limit equal to or close to the amount of cash you deposited with the lender. 

So, for example, if you deposited $500 with the issuer, you may get a secured card with a $500 credit limit.

If you default on a secured card, the issuer will keep your security deposit to pay your balance. It will also report the default to the credit bureaus. 

You can’t argue that because you already paid them, your card was never actually late. The deposit isn’t payment for future invoices. You still have to pay your bills just as you would any other extension of credit.

Find a Card That Reports to All 3 Bureaus

One more thing to keep in mind as you consider applying for a secured credit card is whether it reports to the major credit reporting agencies. 

Not all secured card issuers report their accounts to Equifax, Experian, and Transunion, the three main credit reporting agencies, because it’s not mandatory. This means you cannot force your card issuer if its policy is to report accounts to only one or two of the credit bureaus.

Secured cards that are not reported to all three of the credit bureaus have even more limited credit-building value. If an account is not on a credit report, it’s like the tree that falls in the woods. Nobody hears it, and nobody cares. 

If you open one or more secured cards and the card issuer only reports to one or two credit bureaus, the card will have no value to that third credit report. That also means any scores derived from that third credit report will not and cannot consider how well you’ve managed the card because the scoring model cannot see the card.

The easy way around this is to shop for secured cards from card issuers that report to all three credit bureaus, such as:

SECURED RATING

★★★★★
4.8

OVERALL RATING

4.0/5.0
  • No annual or hidden fees, and you can earn unlimited 1.5% cash back on every purchase, every day. See if you’re approved in seconds
  • Put down a refundable $200 security deposit to get a $200 initial credit line
  • Building your credit? Using a card like this responsibly could help
  • Enjoy peace of mind with $0 Fraud Liability so that you won’t be responsible for unauthorized charges
  • You could earn back your security deposit as a statement credit when you use your card responsibly, like making payments on time
  • Be automatically considered for a higher credit line in as little as 6 months with no additional deposit needed
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
N/A
26.99% (Variable)
$0
Limited, Bad

SECURED RATING

★★★★★
4.7

OVERALL RATING

4.0/5.0
  • No annual or hidden fees. See if you’re approved in seconds
  • Building your credit? Using the Capital One Platinum Secured card responsibly could help
  • Put down a refundable security deposit starting at $49 to get a $200 initial credit line
  • You could earn back your security deposit as a statement credit when you use your card responsibly, like making payments on time
  • Be automatically considered for a higher credit line in as little as 6 months with no additional deposit needed
  • Enjoy peace of mind with $0 Fraud Liability so that you won’t be responsible for unauthorized charges
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
N/A
26.99% (Variable)
$0
Limited, Bad
Discover it® Secured Credit Card Review

at Discover Card’ssecure website

SECURED RATING

★★★★★
4.7

OVERALL RATING

  • No credit score required to apply.
  • No Annual Fee, earn cash back, and build your credit with responsible use.
  • Establish your credit line by providing a refundable security deposit of at least $200. That means a $200 deposit for a $200 credit line. Or a $500 deposit for a $500 credit line. Bank information must be provided when submitting your deposit, and the security deposit equals your credit limit.
  • Automatic reviews starting at 7 months to see if we can transition you to an unsecured line of credit and return your deposit.
  • Earn 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter. Plus, earn unlimited 1% cash back on all other purchases – automatically.
  • NEW! Discover helps remove your personal information from select people-search websites. Activate by mobile app for free.
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
10.99% Intro APR for 6 months
25.24% Variable APR
$0
New/Rebuilding

By using a card that reports to all three bureaus, you will then know for certain that you’re getting the maximum value out of opening a secured card.

Be Realistic About Credit-Building Expectations

The Fair Credit Reporting Act allows negative information to remain on your credit reports for seven and 10 years. Those who have gone through the credit rebuilding process know firsthand that it’s a long journey. 

Adding a secured credit card to your credit reports doesn’t cancel the negative impact of a derogatory credit history. Secured cards are not a silver bullet. You need to be realistic with your expectations.

Adding a secured card to your credit reports can help rebuild your credit, but it can’t eliminate the impact of defaults, late payments, and collections. A secured card won’t turn your 580 FICO Score to 700 overnight. 

Advertiser Disclosure

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