A secured credit card is made for bad or no credit. A refundable deposit backs it and usually sets your limit, and your on-time payments build credit like any card’s. Choose one that reports to all three credit bureaus, charges no annual fee, and spells out how you earn the deposit back.
Lenders want a history of on-time payments before they approve you. After a bankruptcy, a collections account, or a divorce, or with no credit file at all, you can’t build one without an account.
The deposit lets an issuer say yes. It never pays your bill, so you still owe a payment every month, and the issuer reports each one to the credit bureaus. You get the deposit back when you close the account paid off or when the issuer upgrades you to a regular, unsecured card.
Starting from no credit file, you can get a FICO credit score once the card is six months old. If you’re rebuilding, most negative marks stay on your report for seven years, ten for a Chapter 7 bankruptcy, but they count for less as they age.
Three features separate a good secured card from a bad one:
- It reports your payments to all three credit bureaus, not just one or two, so any lender that checks your credit sees them.
- It charges no annual fee.
- It spells out how you upgrade to a regular card and get the deposit back without closing the account.
For specific cards, see our list of the best secured credit cards. Skip any bad-credit card that charges a program fee to open the account or bills the first year’s annual fee on day one. On a $300 limit, a $75 annual fee billed at opening leaves $225 to spend and a balance you owe before you’ve bought anything.
Then put one small recurring bill on the card, such as a streaming subscription, and set autopay to the full statement balance. Use it for nothing else. The issuer reports a small balance and an on-time payment every month, and paying in full means you pay no interest.
Upgrades typically come after six months to a year of on-time payments. If a year passes without one, call and ask for it, because some issuers wait to be asked.
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