Getting Your Secured Credit Card
Who Can Get Approved?
While secured credit cards are for people with no credit history or bad credit, you have to keep in mind that there are still some risks that the lenders aren't willing to take.
For instance if you currently have a bankruptcy or an unpaid charged off credit card.
Even though you will be sending in a deposit to reduce the risk, creditors still want to feel confident in your current ability to pay your bills on time and they want to use your security deposit as a last ditch effort.
You will also need to have some form of income so that you have proof of the ability to pay back what you use.
How Does The Process Work?
The process to obtaining a secured card will be pretty much the same for each company; however, there might be a few differences but getting your card looks like this:
You apply online - The credit card company looks at your credit report and score to determine if you are eligable for the card, if so, you're approved.
Pay your deposit - Once you have been approved, you still need to fund your account with the security deposit and depending on the credit card company, you can pay with direct deposit, debit card, credit card, check or money order. Also be mindful that you don't wait too long to fund the account or the company could reject your application.
They send your card - Depending on the company it can take from 7 to 14 days to get your card, once you receive it you want to use the candy bar method (buy 1 candy bar per month) to make sure you are making on-time payments and to keep your credit utilization low.
Pay your bills on time - It is important to pay your bills on time because your secured card(s) will be reported to all three major credit reporting agencies.
Upgrade Your Account - Using the above methods will help improve your credit over-time and when that happens you will be able to apply for unsecured cards. We wouldn't recommend canceling the secured card for at the least 2 to 3 years of usage and even then, if it is your oldest account, still don't cancel it.
Alternatives To Secured Credit Cards
Merchandise / Catalog / Store Cards
These types of accounts might have slipped your mind, but don't miss out on the opportunity to obtain credit or rebuild your credit with store or catalog cards.
Even though you can only use these accounts at the store or location that issued you the credit, they will still report to all 3 credit reporting agencies and help you establish a credit history.
Feel free to check out our Fingerhut review where we go over how their credit account works.
Credit builder loans are being marketed as the way to build your credit, without a credit card. These types of loans are for people with little to no credit and they don't pull your credit to determine your eligibility.
The way they work is that you take out a loan and the creditor holds onto your funds in a savings account. You then repay the loan over a specific monthly time frame and once all the payments have been made, the money is released back to you.
Your credit will now show a positive payment history and a paid off loan; a win win situation for you. Feel free to check out our review of one of the best credit builder loan companies Self Lender.
Become An Authorized User
Another option you have (that won't cost you a thing) is asking a friend or family member, that is great with both their money and credit, to add you as an authorized user to their account.
This option gives you the ability to get established credit and grow your credit history without a need for a hard pull on your credit and without having to come up with any type of deposit.
The only draw back to this is that whatever happens to the credit, it will reflect on your report as well so getting a responsible person is very important.
Of course, if you have no one you can think of then this method doesn't work for you, but it is a great alternative to secured cards.
How We Rate
The Credit Knocks team selects the best secured credit cards available to us on their overall value, these factors include things such as the initial deposit fee required, annual fees, if a credit check is required, if there are any types of rewards programs and the ability to graduate your card as well as interest rates.