Will a secured credit card really help my credit score?
Believe it or not, that’s one of the most asked questions that we get here at the Easiest Credit Card to Get, and believe it or not, the correct answer is a resounding YES. You see, secured credit cards work just like true credit cards in that you have a credit limit, you make payments, and you actually pay interest with most secured credit cards. And, just like a true credit card, the secured credit card company reports all of those things to the credit bureaus on a monthly basis. The only real difference between the two is that, with a secured credit card, you have put down a deposit that is typically equal to your credit limit.
So, how does a secured card help your credit?
Well, as I mentioned, the credit card company reports both your credit limit and your regular payments to the credit bureaus. This, in turn, helps you to build a solid payment history AND proves that you have available credit. These are the two most important factors in your credit score. The TWO most important. Everything else counts for bits and pieces – these two items are right at 30% of your score EACH. So, if your credit score is bad – the fastest and easiest way to improve on your credit score it to work on these two things. And the easiest way to do that is to get a credit card.
But, if your credit score is bad, no one will give you a credit card, right?
How many times have you been turned down for a credit card because your credit score is too low? If you’re like a lot of people – too many! But wait, that’s the beauty of the secured credit card – you won’t be turned down! That’s right, you won’t be turned down for this credit card because you are securing it with your cash. And the bigger the deposit, the bigger your credit limit. Want to increase your credit limit? Increase your deposit! Want to cancel the card? As long as the balance is paid off, you’ll get your whole deposit back!
So, how is a secured credit card different from a prepaid card?
You have to put money on both, right? Right. But the real difference is in the details… prepaid cards do not, for the most part, do any reporting to the credit bureaus. They’re not really designed to be used as you would use a credit card, and as such, a prepaid card won’t do anything for your credit score. Secured credit cards, on the other hand, were designed to function just like a true credit card, and like having a true credit card, a secured credit card will affect your credit score.