How does a secured credit card work?
Unlike normal (unsecured) credit cards, secured credit cards require an upfront deposit — most have a $200 minimum and $1,000 max — that also serves as your credit limit. If you miss a payment, the card issuer will settle the account with your deposit and adjust your credit limit accordingly, but you’ll still have to pay interest. If you decide to close a non-delinquent account, your deposit will be refunded.
Secured cards are great for rebuilding credit
Secured credit cards are less risky for lenders than regular credit cards because they’re bankrolled by you. Less risk means you don’t have to have a great credit score to qualify. That’s why secured cards are one of the best ways to build and improve credit. And after a few months of disciplined use, you might even be able to upgrade your credit limit — or qualify for an unsecured card with a better rewards program.
What is considered a bad credit score?
A FICO® score of 669 or below is less than ideal. A “good” score ranges from 670-739. Anything above that is ideal for scoring the best credit card interest rate possible. Take a look at the FICO® ranges below to see where you fit.
How can I raise my credit score quickly?
Rebuilding your credit score takes time and discipline, but there are a several practical first steps that you can take to jumpstart the process.
Check your credit report for errors
Here is the online dispute information for all three credit bureaus:
Raise your available credit
Depending on your credit history, a lender may raise your credit score on request. Doing so will lower your credit utilization ratio, and in turn give a slight boost to your credit score.
Ask for a partial payment
Instead of settling for a defaulted credit card bill, ask your lender whether it will accept a partial payment for a debt in collections and classify the debt as “paid.” Otherwise, you risk a serious blemish on your credit report that sticks around for years.
How long does it take to rebuild credit history?
How long it takes to rebuild credit history will depend on your financial situation. The good news is, though, that you can take steps today that put you on the path to positive credit.
First and foremost, if you have a large amount of outstanding debt that you’ve been struggling to pay off, then you should focus on reducing that debt before you incur any more debt. Once your current debts are managed, you can start rebuilding credit with one of the best credit cards for bad credit.
To get started, you’ll want to understand what goes into your credit score. FICO® Scores are broken down by:
- 35% payment history
- 30% amounts owed
- 15% length of credit history
- 10% new credit
- 10% credit mix.
The most important thing you can do to improve your credit history is to pay your bill in full every month. As your score improves, you can apply for one of the best unsecured cards for bad or average credit, or even one of the best rewards credit cards if you make good strides. This will help you establish new credit, as well as add to your credit mix.
Be careful before you close old cards. When you close a card, it changes the percentage of your credit limit that is active (your credit utilization ratio), which in turn can impact up to 30% of your credit score. The effects are temporary, but we recommend against canceling credit cards right before applying for a mortgage, vehicle loan, or apartment.