Are you having some difficulty getting approved for a traditional credit card? Whether you’re looking to establish your credit from scratch or raise your credit score, a secured credit card could be a viable alternative. It caters to credit newbies and consumers with past credit challenges or bad credit.
But maybe you’re wondering how it actually helps improve your credit score, what kind of an increase to expect or how long it’ll take to build credit with a secured credit card? Read on to discover the answers that you’re looking for and learn about an innovative mobile app that can help boost your credit health.
What is a Secured Credit Card?
Like traditional credit cards, secured credit cards can be used to make everyday purchases. But there’s a fundamental difference – secured credit cards require a deposit before you can start using the account. It’s typically equal to your credit limit and serves as collateral.
In the unlikely event you fall behind on the monthly payments, the credit card issuer can keep your deposit (or the portion of the amount you owe) to recoup their losses. You also have the option to close the card to get your deposit back, and some credit card companies even upgrade you to an unsecured credit card after an extended period of responsible use.
To build credit, the secured card must report account activity to the three credit bureaus – Experian, TransUnion and Equifax.
How Secured Credit Cards Can Help You Raise Your Score
If your credit score is on the lower end, there are a few ways you can use a secured credit card to raise it:
- Make timely payments. Try to pay before the due date if possible.
- Keep the balance down. Only spend what you can afford to pay back each month and try to pay the balance in full each month.
While managing your secured credit card responsibly, you should also get current on any past-due accounts and dispute inaccurate errors on your credit report that could be dragging your score down.
How Much Will a Secured Credit Card Improve Your Credit Score?
It depends on your current credit rating and whether you have an established credit history or are just starting. However, you’re likely to see a more significant impact in a shorter history if you’re a credit newbie.
How Fast Will a Secured Credit Card Help Build Credit?
If you’re building credit from scratch, you can use a secured card to build credit by paying on time each month. But, again, payment history is the most significant component of your credit score, so you could see a hefty increase in your credit score within a six-month period. But, again, the amount of the increase will vary by individual.
It’s equally important to keep your credit utilization at or below 30 percent to give yourself the best chance at maintaining a healthy credit score.
How To Raise Your Credit Score with a Secured Credit Card
When you’re ready to open a secured credit card, keep the following in mind to help ensure you meet your credit goals:
Get the Right Card For You
Are you not entirely sold on getting a secured credit card to build credit or improve your score? Then, consider Grain to access a revolving line of credit of up to $1,000 with no credit score required. and meet your credit goals without handing over a security deposit.
The mobile app syncs with your primary checking account to analyze cash flow and determine the best credit line for you. There’s no credit check for a credit line up to $1,000, so you won’t have to worry about a hard inquiry dinging your credit score.
Plus, Grain syncs with your checking account, making it easy to pull funds from your line of credit whenever you need them instantly. So, you can continue to make purchases using your debit card.
Grain also reports to the three major credit bureaus – Experian, TransUnion and Equifax – to help improve your credit health by adding positive payment. And you can keep tabs on your credit score directly from the Profile tab of the mobile app as it’s updated monthly.
If you’re interested in using Grain as an alternative to a traditional secured credit card, download the mobile app to learn more today. It’s available on the AppStore, or you can add your email address to the waiting to be notified when the app is released on Google Play for Android users.
Ensure That Your Transactions are Being Reported
A secured credit card will only help your credit score if you use it and the credit card issuer reports account activity to at least one of the three major credit bureaus.
Monitor Your Spending
Keep your spending in check so you don’t end up with an excessive balance or in a position where you can’t at least make the minimum monthly payment.
Pay Off Your Balance Early and Frequently
To boost your credit health, avoid carrying a balance on your secured credit card each month.
Don’t Max Out Your Account
As mentioned above, the balance should not exceed 30 percent if you’re serious about raising your credit score.
Keep It Open
When you close a credit account, it negatively impacts your credit age. So, refrain from closing your secured credit card and hurting your length of credit history, which accounts for 15 percent of your credit score.