How a Secured Credit Card Can Boost Your Credit Score

The difference between reaching your goals or not attaining them might depend on three numbers — your credit score. With a good credit score, you may receive a loan for a car, house or small business, all of which change your life. Without a good credit score, you may not qualify for loans or lenders charge exceptionally high interest. While you can’t raise your credit score overnight, you can do so over time. One of the best ways to boost your credit rating is via a secured credit card.

How Secured Credit Cards Work

With a secured credit card, there is no risk to the lender. That’s because the person opening the secured credit card account must put down a cash deposit, usually around $200. That deposit is the same as the individual’s credit limit and serves as collateral. If the secured credit card holder doesn’t make a payment, the lender simply takes the amount owed out of the deposit. Expect to pay an annual fee on a secured credit card.

A secured credit card works the same way as a traditional credit card. The borrower can make purchases up to the card’s credit limit. If they do not pay the secured credit card bill in full, they must pay interest on outstanding balances. All the pertinent information is included in the secured credit card agreement.

One caveat: Not every secured credit card issuer reports to the major credit card bureaus – Experian, Equifax, and TransUnion. If your primary reason for obtaining a secured credit card is credit repair, make sure the issuer is sending this information to the credit monitoring agencies.

How a Secured Card Boosts Credit Scores

For best results, use only a small portion of your credit on your secured card, not the entire amount. That’s true even if you are paying off the entire bill each month. Not using all of your credit is a factor in raising a credit score. However, the priority in credit score determination is payment history, so making your payments on time is essential. A missed payment can set the “recovery time” back 18 months.

Every time you make an on-time payment, your credit score improves incrementally as per the credit monitoring agencies.  How long it takes to boost credit scores with a secured card depends on the individual. In some cases, the credit score may improve in as little as six months, but it may take considerably longer in other situations. People with no credit history can use secured cards for establishing one, and they are most likely to see a quick jump in their credit scores.

PRBC Can Help 

If you want to rebuild your financial life, we can help. PRBC membership allows the factoring of everyday payment records into your alternative credit profile and thus you can join the alternative credit revolution.

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