A secured credit card can help with building credit, and you can get one in three easy steps.
When it comes to building credit, you’ll thank yourself when you start early. A secured credit card is an excellent way to get going and put your best foot forward — and you’ll learn how to manage a credit card. The path to getting a card in your hand and knowing what to do with it can be taught in three simple steps.
1. Find the right secured credit card for you
You have many secured cards to choose from, so consider which type of secured card you need. Our guide to secured credit cards can help you do just that. Just like travel and cash back cards come with different strengths, secured cards can bring different perks to the table as well.
Here are a few types of cards you might like:
- No annual fee. You already have to put down a security deposit to open a secured card. To avoid paying more money up front, a no-annual-fee card is a great choice.
- Low deposit. Secured cards aren’t exactly cheap — it’s not uncommon for providers to require deposits of $250, $300 or even $500. If you don’t anticipate spending much with your card, consider a low-deposit card. You can build credit without tying up a lot of money in your deposit.
- No credit check. Even secured-card providers can decline you if your credit score is too low. To get around this possibility, consider applying for a card that doesn’t require a credit check.
- Low APR. A secured credit card with low APR can save you a nice chunk of cash that you’d otherwise be paying in interest if you were using a card with a high APR.
2. Apply for the card
Once you’ve narrowed it down to the card that is a perfect fit for you, click Go to site and head to the card provider’s website. Next, you’ll have to complete the application with your personal and financial information that can include:
- Your Social Security number and date of birth
- Your contact information, including email address and phone number
- Your banking details
- Your employment status
- Your total annual income
- The cost of your monthly rent
You’ll likely need to indicate how much you want to put down as a security deposit. If you’re approved, your card provider will draw that amount from your bank account. If you’re not asked to provide a deposit amount, your card provider will collect the deposit from you later.
Once you send your application, sit tight while the provider reviews your application. In some cases, you’ll receive an immediate decision — if not, you’ll need to wait a few days or even a few weeks to receive word on your application.
3. What to do now that I’ve got the card
Whether you’re building or repairing your credit, using a secured credit card responsibly can be essential to pushing your credit score in the right direction. In order to effectively use your card, you should make timely payments, maintain a low credit utilization ratio and pay your balance in full each month.
Your credit score will only go up if the bureaus see that you’re using your card responsibly. And because you want to build your credit, it’s crucial that your payment history is reported to the three major credit bureaus: TransUnion, Equifax and Experian. If the card you’re considering doesn’t report to the three main credit bureaus, look for a different card.
What if my application for a secured credit card was denied?
The first course of action to take once you’ve been denied for a secured credit card is to identify the reason why you’ve been denied. You can do this by contacting the lender directly and asking for answers. There may be inaccurate information on your credit report — if this is the case, contact the credit bureaus to dispute the misinformation.
You could also consider applying for a secured credit card at a credit union or with a lender that doesn’t conduct a credit check. Another option could be becoming an authorized user on someone else’s credit card account.
What should I look for in a secured credit card?
When researching what card will best fit your needs, there are a few main factors to take into consideration:
- How much do you have to deposit?
- What’s the annual fee?
- How high is the APR?
- Is there a grace period for interest payments?
- What are the fees?
- Is your payment history reported to the three major credit bureaus?
A provider’s website should clearly list a card’s deposit, annual fee and APR. When you’re confident you understand all of the card’s details, it’s time to submit an application.
That was easy, wasn’t it?
Once you receive your secured card, it’s time to build your credit. Keep track of your payment due dates and make your payments on time to avoid late fees and penalty APRs.
Over the long run, you’ll slowly see your credit score tick upward — and, eventually, you’ll be ready to apply for an unsecured card.