How to Use a Secured Credit Card to Build Credit

by Contributor ; Updated July 27, 2017
Use a Secured Credit Card to Build Credit

How to Use a Secured Credit Card to Build Credit. How do you improve a credit score? The answer can be a secured credit card for people with bad credit history. Not only can it keep you out of dangerous financial waters, but it can also show potential creditors that you've improved you've taken more responsibility for your use of credit.

Step 1

Shop around, but don't apply for more than one at a time. The more credit inquiries on your report, the worse it looks to potential creditors. Credit cards, secured or not, come in a wide variety of terms. Find one with a low, non-fluctuating Annual Percentage Rate, as well as a low Periodic Rate. Beware of introductory offers that start with low rates and jump after a short time to unreasonably high fees. Remember, the fine print on the credit card offer is more telling than the splashy headline.

Step 2

Start with a low available balance. Put only what you can afford into the card. Add funds to a newly obtained card only after your bills are paid. You can begin improving bad credit with a secured card starting with available funds as low as $25 or $50. If the secured card offer you're considering requires a higher deposit than you can reasonably afford, pass it up and keep looking.

Step 3

Use no more than half of the available balance. Even though you have access to the funds, the idea is to use but not drain the card. Credit agencies will look at the card's usage, including available credit. If you pull out the available balance almost as quickly as you put it in, your credit score will not improve.

Step 4

Pay bills with the card only when you can immediately replace the funds. Always pay credit cards, secured or not, in full before the due date. The best way to accomplish this is by not using the card unless you have replacement funds. If you use the card without the ability to replace the funds, you're simply hoping the money will appear within 30 days. Be proactive, not reactive, to keep your credit repair plan on track.

Step 5

Up the ante when you're financially ready. After several months of re-setting your secured card without incident, consider depositing additional funds to the card. Repeat Steps 3 and 4 with the higher credit limit. This improves your credit score without allowing you in over your head.


  • Unreported cards will not improve your credit score. Have your card reported to all three Credit Bureaus. It is essential to pay your bills on time. Paying bills promptly and in full is a more powerful score-building tool than the use of a secured credit card for people with bad credit.