Do you know what factors have an impact on your credit score?
There are many. If you’re looking for a secured card, make sure it will work with your current financial situation and help you raise your credit score.
In this guide, we’ll go over how a secured card can help you improve your credit score and the factors that influence it, so you don’t waste money on something that won’t work for you.
What is a secured card, and how do they work?
A secured credit card is a type of bank account that requires an initial deposit.
The deposit is usually the same as your credit limit and is kept in a secured savings account. If your account is in good standing, the deposit is typically refunded to you.
While the funds are not immediately available, they earn interest while being held by the bank, making a secured credit card similar to prepaid debit cards. Having one or more secured cards on file, on the other hand, will help build your credit score over time, unlike many other types of prepaid accounts.
Secured cards can be very beneficial to people with no credit history because they are easy to obtain and allow you to access funds while also helping your credit score grow.
Small deposits are also easier to manage than larger loans for those who don’t have a lot of money to spare. This makes it easier for people with bad credit to improve their credit and get approved for unsecured credit cards in the future.
If your goal is simply to open one or more secured card accounts, you may notice an immediate benefit from having access to extra funds and using them responsibly. The next step is to use the cards carefully and pay your bills on time each month.
The better you are at making payments on time, the better your overall credit rating will improve. If you are eventually approved for an unsecured card, your credit score will benefit from the positive payment history associated with each secured account.
The benefits of having a secured credit card:
- Secured credit cards are a great way to build your credit
- With a secured card, you can get cash advances and purchase items with the card
- You don’t need good or excellent credit to get approved for a secured card
- If you make your monthly payments on time, this will show up as an increase in your credit score over time
- Secured credit cards can be an easy way for young adults or college students to start building their credit.
Secured cards can help you establish a good payment pattern, which will reflect positively on your score. Secured cards are great because they’re easier to qualify for than unsecured ones, and they don’t require a credit check.
Why should you get a secured credit card rather than another type of credit card?
Secured cards are intended for people who have poor or no credit.
They are also a good option if you want to improve your credit score before applying for an unsecured card, such as one that offers eco-friendly rewards (like the Aspiration Zero Card).
A secured card will help you build your credit history because you will report your payment activity to the credit bureaus each month. This is ideal if you want to establish or re-establish a good credit history and score so that when you are ready for an unsecured card in the future, your score will have increased sufficiently!
A secured card can also help you reach your spending limit more quickly than a regular credit card. This is because a secured card reports your spending activity to the bureaus each month, whereas an unsecured card does not report this information unless you choose to pay it off in full every month and on time.
What credit score do you need to get a secured card?
Several factors influence your credit score, but typically, customers must have a credit score of at least 500 to be approved for their first secured card. When looking for a new account, it’s critical to take into account all of this information.
Using a secured card can help you improve your credit score.
Whether you have good, bad, or no credit, opening a new account is the best way to begin rebuilding your financial history and increasing your overall score. A secured card will give you more borrowing flexibility, but only borrow what you know you’ll be able to repay in full and on time.
Can I get a secured card if I have bad credit?
Absolutely! If you’re looking to rebuild your financial history, there’s no better way than using a new account that reports to the three major bureaus: Equifax, Experian, and TransUnion.
Secured cards will allow you to build your credit score little by little, allowing you to eventually graduate into an unsecured card.
What is the average increase in scores for secured cards?
The average credit score increase for someone with poor credit is around 30 points. It’s difficult to predict an exact number because everyone starts at a different point.
Several factors contribute to your credit score, but the most important factor is payment history. If you make your payments on time, using a secured card responsibly should result in a decent increase in your overall score.
What if my scores aren’t increasing?
If, after about six months of responsible use, you still haven’t seen an increase in credit score, then you’ll want to ask yourself if your spending habits are truly changing. If not, then it might be time to consider other options for increasing your scores.
How much does a secured card cost to open?
Most secured cards have an opening deposit that ranges from $50-$200. After the initial purchase, there are no annual fees for using your card each month. If you’re looking to increase credit scores quickly, then this is a great place to start.
How do I build my credit with a secured credit card?
Using a secured card responsibly demonstrates to credit bureaus that you can manage this type of account.
If your credit score is less than 650, it is critical that you make your payments on time each month and do not exceed your credit limit. This is an excellent way to repair your credit and get your finances back on track. If you want to improve your credit score, a secured card may be the best way to do so.
Is there any downside to using a secured card?
Secured cards do have some drawbacks.
Because of your deposit, you are limited in the amount of credit you can receive on the secured card. If you need more access to funds, it may be time to consider upgrading to a different type of credit.
Another disadvantage is the required deposit. If you can’t afford a certain amount, it might be better to choose another option that doesn’t require a lump-sum payment upfront.
Typically, secured cards have an annual fee, and if your credit score improves enough to allow you to apply for better forms of credit, the fee will be waived, and you will only be required to pay for your deposit.
What factors determine how much my credit score might increase with a secured card?
The age of accounts, new credit inquiries and your credit utilization ratio all play a role in determining how much of an impact using a secured card has on your FICO score.
The older the account, the better it will be for your score; this means that closing an old card or line of credit may not have much of an impact on your score. The same is valid for applying for too many new credit lines in a short period (30 days).
Another factor is your credit utilization, or how much of your available credit you’re using at any given time. If your limit is $500 and you only use $100 per month, that’s preferable to having an additional card with a $500 limit but never paying it down to less than half its capacity.
What can I do to improve my credit score before applying for a secured card?
There are several things you can do to improve your FICO score, but before you look into any of them, it’s best to understand what kind of credit history and other factors may be affecting your score. If you decide to go that route, you’ll want to know how much of a positive impact a secured card will have on your credit score.
Why is it important for me to have good credit?
To be approved for loans and other financial products, you must have good credit.
Having good credit will also help you when purchasing a home, car, or applying for insurance. Secured cards are available to people with low credit scores if they want better access to credit. The only issue is that it’s difficult to predict how much a secured card will improve your credit score.
Your carbon footprint is your credit score
Aspiration Zero is the first carbon credit card that rewards people for reducing their footprint.
You can earn up to 1% cashback on your everyday purchases with the use of this card. With every swipe, you are planting trees and earning money back until you reach zero emissions!
If you’re not quite ready to go full-on carbon neutral but want a way to reduce your impact––why not give it a try? Meet Aspiration Zero today and find out how easy going green can be!