Home > Credit Score > Are Secured Credit Cards the Best Way to Rebuild Credit?

Comments 0 Comments
Advertiser Disclosure


If your credit score is in the ditch, there are a number of reasons why you may want to rebuild it. Perhaps you are looking to make a major purchase, such as a home or a vehicle, or you may need to obtain a credit card for something as simple as a car rental. Regardless of the situation, raising your credit score can be very difficult and time-consuming if not done properly.

Although a secured credit card may seem like a simple way to start rebuilding a damaged credit score, is it the best option available? Well, the answer to this question depends on your unique financial situation, and there are a few factors that can help you determine if it will best suit your needs.

What to Consider

Before applying for any secured credit card, carefully review the terms and conditions of the particular card to determine your eligibility. Some credit issuers will only offer secured credit cards to those without a credit history, and not to those who are seeking a second chance at rebuilding their damaged credit.

Fees and Interest

Some cards are accompanied by an annual, activation and monthly maintenance fee, which can end up costing you more than the card is worth and absorbing a substantial amount of your available balance before you even have a chance to make a purchase. This is problematic if you do not have the means to quickly reduce the outstanding debt balance, because it could give you a high debt to available credit ratio, which could have an adverse effect on your credit scores. To avoid this pitfall, select a secured card that requires little to no fees to acquire and maintain.

Reporting Practices

In order for your score to be impacted by a secured credit card, the credit issuer must routinely report activity to each of the major credit bureaus — Equifax, Experian and TransUnion. This serves as proof that you are responsibly handling your debt.

Other Ways to Rebuild Credit

A secured credit card can be the pathway to better credit if you choose the right card for you, and you use it responsibly. However, there are other factors that affect your credit, and if any of these issues apply to your credit situation, these steps can help you if you’re looking to rebuild.

Also, as you work to rebuild your credit, it can be helpful to track your progress by monitoring your credit scores.  You can do this for free using a tool like Credit.com’s Credit Report Card, which updates your credit scores every month, and gives you an overview of your credit profile so you can see which areas of your credit need help.

Dispute Inaccurate Information

Start by obtaining your free credit reports. If you notice any inaccurate information after reviewing them, immediately file a dispute online or via certified mail with one of the major credit bureaus. They must notify the other two credit bureaus and respond to your dispute within 30 days. If you win your dispute, the errors must be removed immediately from your credit file; this can have a positive effect on your credit score. On the other hand, if the creditor does not rule in your favor, request that a note be placed in your file that details the dispute.

Timely Payments

Approximately 35% of your credit score is determined by payment history. As a result, you can also rebuild your credit over time by catching up on all past-due payments and developing responsible payment habits. If you are unable to meet an obligation, reach out to the creditor to inquire about arranging an alternative agreement.

Pay Off Debt

The most rapid way to reduce the amounts owed to creditors, which accounts for about 30% of your credit score, is to pay off any outstanding debt obligations. You can do this by cutting your costs and re-allocating any residual funds to your debt-management fund. You can also pick up side jobs to aid in the efforts.

If you make the decision to move forward with a secured credit card, use it responsibly to derive the greatest benefit. Maintain a very low credit balance, ideally no greater than 10% of the credit limit, and remit timely payments each month. You might decide to use the card as temporary medium until your credit score gets better; however, responsible use of credit over time can be a great way to further build or maintain a strong credit score.

Regardless of the route you choose, be sure to avoid credit repair scams as they only provide a source of temporary relief.

Image: SnowWhiteimages

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team