Rebuilding Bad Credit with a Secured Credit Card

If you have less than a perfect credit, a limited credit history, or recent derogatory marks on your credit report, you may have trouble applying for many of the credit card options currently available on the market. But there is another way to prove that you can handle credit responsibly: a secured credit card. Since collateral protects the issuer from losing money, secured cards are easier to get for people with bad credit or no credit at all.

Each secured credit card has its own minimum and maximum credit limits, usually ranging from a minimum initial deposit of a few hundred dollars to several thousand dollars, depending on the card limit and the amount of deposit you are willing to make. After you apply for a secured credit card and get approved, be sure to provide a security deposit.

There are also secured credit cards that offer an opportunity to increase the initial credit limit without additional deposit. The Merrick Bank Double Your Line® Secured Credit Card, for example, gives a chance to double the credit line in as little as seven months after opening an account. During the first seven months from account opening, cardholders need to use their card and make at least the minimum payment on time every month. After that, cardholders may receive a double credit line increase automatically if they qualify.

If you’re hoping to use a secured credit card to improve your credit score, it’s important to follow the general rules below.

Pay your bills on time
Making your monthly payments on time is a key to building up a good credit profile. The best secured cards will report your payments to all three major credit reporting agencies, so you can eventually graduate to more attractive terms and rewards or even better credit card options.

Set up a monthly autopay
Sometimes setting up automatic payments or signing up for payment reminders can help you stay on track for a stable credit history. With autopay, you can set up a payment to make just the minimum, though it’s better to pay off the full amount each month.

Keep your credit utilization low
Another general advice is to keep your credit utilization, the amount of your available credit that you use, under 30 percent. Once lenders can see you are able to handle a secured credit card without overspending or missing payments, they may increase your credit line or even offer you an unsecured credit card.

Keep credit accounts open
The overall length of your credit history will not change when you get a secured card, unless you have no credit history at all. However, the older the account in your credit report, the better your score, provided your payment history and credit utilization are good.

Bottom line
Summing it up, secured credit cards can be the answer to rebuilding your credit if used in the right way. Make sure to keep a close eye on your credit reports from all three major credit bureaus to ensure consistency and accuracy as you work to build your credit scores. And while rebuilding your credit isn’t an overnight process, these small tips will help to make a strong contribution to the common case.