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What Should I Look for In a Secured Card? – Lorraine

“Dear Steve,

I have a really bad credit score, and I am trying to slowly but surely raise that. I have already paid all of my accounts that were in collections, and disputed two of those accounts.

I am going to follow your advice and get a secured credit card, but I am a little overwhelmed when it comes to finding the right one that won’t screw me over. Can you recommend a good secured credit card, or things I should look for in a good one?

Lorraine”

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The Answer

Dear Lorraine,

The goal of the secured card in this case is to help you rebuild your credit. To do that the card will need to report to the credit bureaus, preferably all three major credit bureaus. That would be my minimum requirement.

Outside of that the terms and conditions with each agreement will most likely be different. You will need to read those terms and conditions to compare the different fees and features of each card.

Interestingly, for me, the least important feature is the interest rate, since the goal is to pay the card balance off each month you won’t be charged interest.

Boosting Your Credit Score With Good Credit Using a Secured Card

Using the report card analogy, if you wanted to bring up your GPA you would need to earn some better grades to do it. It is the same with your credit report. If you want to bring your score up you need to start having new and good credit reported about you.

The best way to do this is to get and use a secured credit card. In fact get two different ones. I put together a section of the site that lists reviews for secured cards. Look at the secured cards here.

The advantage of getting a secured card is that you will get the credit card and not get a rejection on your credit report that will further hurt your credit. A rejection can be easily spotted by looking at the inquiry section of your credit report and seeing there is not a corresponding card opened. And with your current bad credit, if you applied for an unsecured card, you would get rejected.

The reason you will get the secured credit card on the first attempt is because you need to put up a deposit with the bank that is equal to your credit limit. The deposit will earn you interest and in the unfortunate event you were unable to pay your card and defaulted, the bank would use your deposit to pay the debt.

When looking for a secured card you want one that will report to all three credit bureaus. This is key. We need your new good payment history reported.

Now when I say use the card, you do not need to carry a balance from month to month. Just use the card for regular purchases and pay the card off either immediately or at the end of the month.

Also, if you get a secured card with a $300 limit, never have more than 35% of the limit on the card. Even though your initial limits may be low, you don’t want to max them out. You can always increase your limits by increasing your deposits. You can increase your credit limit by increasing your deposit with the card company.

I suggest getting more than one card so you can get as much good juice flowing to your credit report without having too many credit cards open. You could actually go with three if you wanted to, but no more than that.

Just make sure the card will report to the credit bureaus.


Please post your responses and follow-up messages to me on this in the comments section below.

Big Hug!

What Should I Look for In a Secured Card?   Lorraine
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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • Shannon

    Great advice!

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