Does a secured credit card build credit?

Secured credit cards require one-time, refundable deposits to open accounts, making them easier to qualify for than traditional credit cards. But a secured credit card can only help you build credit if you use it responsibly and account activity is reported to at least one credit bureau.

What you’ll learn: 

• A secured credit card can help you build your credit scores if it’s used responsibly and if the issuer reports the card activity to at least one of three major credit bureaus—TransUnion®, Experian® or Equifax®.

• Consistently making on-time payments and keeping your balance low are two examples of using a credit card responsibly.

• How long it takes to build credit with a secured credit card depends on what your goal is, where you’re starting and how you use the card.

A secured credit card is a type of card that requires an upfront, refundable security deposit to open an account. The deposit acts as collateral and typically makes secured cards easier to qualify for compared to unsecured cards. Other than the security deposit, secured credit cards work like traditional credit cards.

Building credit takes time and responsible use. Experian says it can take anywhere from several months to more than a year to improve your credit scores.

Here are some factors that might impact how long it takes to build your scores:

Using a secured card responsibly can help you improve your credit scores over time. Responsible credit use includes always making on-time payments. Your credit utilization ratio—or the percentage of your total available credit that you’re using—can also impact your credit scores. Keeping your balances low could help you improve your scores.

If you haven’t established a credit history yet, it might take more time to build your credit scores with a secured card. If you have negative items on your credit reports—referred to as derogatory marks—it could take longer to improve your credit scores.

Building your credit using more than one tool may help speed up your progress. Becoming an authorized user on a trusted friend’s or family member’s account is one option. 

Experian says having your landlord or property management company report your on-time rental payments to the credit bureaus is another possibility. Remember, if the activity isn’t reported to the credit bureaus, it won’t help you build credit.

Here are some things you can do as you work toward building a good credit score with a secured card:

There are a lot of credit cards out there, and comparing card details can help you find the right fit. You might want to look into things like:

• Whether the card issuer reports secured card activity to the credit bureaus

• Whether the issuer charges fees to open an account

• The card issuer’s process for upgrading to a traditional, unsecured credit card

A high credit utilization ratio can negatively affect your credit scores. The Consumer Financial Protection Bureau (CFPB) recommends keeping your credit utilization ratio below 30%. 

Payment history is the most important credit-scoring factor. Consistently making on-time payments of at least the minimum payment can help you build a positive payment history. 

Keep in mind that paying only the minimum each month could lead to interest charges and raise your credit utilization ratio. The CFPB recommends paying off your entire balance each month whenever possible.

Some issuers may close inactive credit card accounts. Using your secured card regularly can help keep the account active. But that doesn’t mean spending beyond your means, because keeping a low balance and making at least the minimum payment are also important.

Monitoring your credit reports and scores can help you track your progress and spot any errors that may be affecting your credit. 

You can get free copies of your credit reports from the major credit bureaus by visiting AnnualCreditReport.com. And with CreditWise from Capital One, you can check your credit as often as you like without hurting your credit scores. CreditWise is free, even if you’re not a Capital One cardholder.

Using a secured credit card responsibly over time may help you improve your credit scores. But that’s only true if the issuer reports secured card activity to at least one of the credit bureaus.  

Capital One offers two secured credit cards: Platinum Secured and Quicksilver Secured. You can see if you’ll be approved with 100% certainty—no credit score required. And Capital One reports secured card accounts to all three credit bureaus.