Do Secured Credit Cards Help Build Credit?

By Dan Miller · February 15, 2023 · 6 minute read

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Do Secured Credit Cards Help Build Credit?

In many cases, a secured credit card can be a good way to establish and build credit. However, if you’re planning to get a secured credit card to build credit, what’s critical to determine is whether the issuer reports usage to the major credit bureaus.

Many issuers do, but some may not. If your issuer does not report information to the credit bureaus, then a secured credit card won’t help build your credit. But if the issuer does, then that secured credit card could be a good starting point for your credit-building journey.

What Is a Secured Credit Card and How Does It Work?

There are two different kinds of credit cards: secured credit cards and unsecured credit cards. An unsecured credit card is what most people think of when they think of a traditional credit card. In many ways, a secured credit card operates in much the same way, with the bank extending a specific amount of credit that you can use throughout the month and that you won’t have to pay until your statement closes at the end of the month.

However, there is one major difference between a secured credit card and an unsecured credit card. With a secured credit card, you have to put down a security deposit. The amount of this deposit is usually what then serves as your credit limit.

This money that you put down also acts as collateral. If you fail to pay the amount borrowed, the lender can take that deposit to help cover its losses. This added protection for the lender is why a secured credit card is generally easier to qualify for if you have a thin credit history.

If you use your credit card responsibly, you’ll get your deposit back in full when you close your account or get upgraded to an unsecured credit card.

Recommended: What a Credit Card Is

Can You Build Credit with a Secured Credit Card?

It is possible to build credit with a secured credit card — as long as your issuer reports usage and payment activity to the major credit bureaus.

If that information is reported, then you could build credit with a secured credit card, assuming you use your account responsibly. For instance, if you routinely make on-time payments, that could make a positive impact on your score, since payment history is one of the key factors that determines your credit score.

Recommended: Tips for Using a Credit Card Responsibly

Tips for Building Credit with a Secured Credit Card

Here are a few tips for establishing credit by using a secured credit card:

Make Sure Your Issuer Reports to the Credit Bureaus

If the issuer of your secured credit card does not report to the major credit bureaus, it is not likely to have an impact on your credit history or score. When looking at and applying for a secured credit card, make sure that it will report usage and payment history to the credit bureaus.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score?

Pay Your Statement Balance On Time and In Full

Your overall payment history is an important factor in determining your credit score. Make sure to pay your secured credit card bill on time, each and every month. You should also not spend more money on your card than you have, so that you can pay your statement balance off in full when it comes due.

Avoid Maxing Out Your Card

Another factor that makes up your credit score is your credit utilization ratio, which is defined as your total balance divided by your total available credit limit. It’s generally recommended to keep this ratio at 30% or lower, if possible. In order to avoid negative effects to your credit score, you’ll want to steer clear of maxing out your card, even if that money is technically available to you.

Recommended: What is the Average Credit Card Limit?

Other Ways You Can Use Credit Cards to Build Credit

Besides using a secured credit card, here are a few other tips for building credit with a credit card:

•   Increase your credit limit when possible. Again, this can lower your credit utilization rate, which is a major factor in determining your score.

•   Set up automatic payments. This way, you never make a late payment. Payment history has the biggest impact on your credit score.

•   Use your credit card regularly. While it might seem safest to keep your credit card tucked away unused, it’s necessary to use it to demonstrate to lenders that you can responsibly repay your debts. Just make sure not to spend more than you can afford to pay off in full.

•   Limit new credit applications. While it might feel tempting to try to get better cards as your credit starts to get established, keep new credit applications to a minimum. Each application results in a hard inquiry, which temporarily lowers your score. Too many applications within a short window of time can also raise a red flag for lenders.

•   Monitor your credit report. Even if everything seems like it’s smooth sailing with your credit, it’s smart to check in regularly. Review your credit report for any errors or any potential signs of fraud.

The Takeaway

If you’re not sure whether you’ll get approved for an unsecured credit card, you might consider a secured credit card instead. With a secured credit card, you put down a refundable security deposit upfront, which serves as your total available credit. Because of this deposit, lenders may be more likely to approve you. If you are approved, using a secured credit card can help you build credit — as long as your issuer reports usage to the major credit bureaus and you use your card responsibly.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.


How much will a secured credit card help my credit score?

There isn’t a specific formula to determine how much a secured credit card can help your credit score. Instead, you should focus on making and strengthening good financial habits like living within your means and paying off your credit card in full, each and every month. A secured credit card can be one way to help your credit score in this manner.

What is the best secured credit card to build credit?

The best secured credit card will vary depending on your specific financial situation. You’ll want to look for a secured card that reports to the major credit bureaus, charges low or no fees, and has a low interest rate. There are secured credit cards that offer a limited rewards program as well, which can make for a nice perk in addition to building your credit.

Can you get a secured credit card with a bad credit score?

Yes, it is possible to get a secured credit card with a bad credit score. Because you are putting down the initial security deposit, lenders may consider you as less of a risk than someone applying for an unsecured credit card. Therefore, you may have greater odds of approval when applying for a secured credit card.

Photo credit: iStock/Delmaine Donson

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .


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