Improve Your Credit Series: How Fast Does a Secured Credit Card Work?

Improve Your Credit Series: How Fast Does a Secured Credit Card Work?

Written by Caitlin Wood
Last Updated April 21, 2021

Whether you’re trying to correct past financial mistakes by improving your credit score or are a first-time credit user, a secured credit card might be the missing tool you’ve been looking for. A secured credit card, when used responsibly, is a great and effective way to build a positive financial history and credit score.

Depending on your fast financial history and any issues you might have experienced, a secured credit card can help improve your credit in as little as 6 months. Unfortunately, there isn’t any magic formula for credit improvement when it comes to secured credit cards. This means that everyone’s experience is unique so don’t get discouraged if it takes up to a year for you to see improvement, in the end, it will be worth the extra time.

How Does it Work?

Secured credit might seem like a complicated financial term to you, but it’s not. A secured credit card is simply a regular credit card that needs to be secured by a deposit; the deposit you pay then acts like collateral in case you don’t make your payments. A deposit typically falls somewhere between $200 and $500 and your credit limit is usually the same amount as your deposit. Other than that you can use a secured credit card the same way you would a “normal” one.

How Will a Secured Credit Card Improve Your Credit?

Building your credit with a secured credit card is the same as building your credit with a regular credit card. Responsible spending is your goal; you should never max out your card and only purchase items you know you can actually afford to pay for with cash. You should aim to keep your credit utilization rate low, this means you should only use a small percentage of your available limit, most financial experts say to keep your balance around 10% especially if you’re trying to build your credit after past financial mistakes.

Payment history is also extremely important when it comes to improving credit. Your payment history is the biggest contributing factor to the calculation of your credit score. If you don’t make your payments on time your score will suffer greatly and since you have a secured credit card you might not get your deposit back.

Why Chose a Secured Credit Card?

You might be wondering why you should choose a secured credit card if they’re so similar to regular credits cards. The simple truth is, secured credit cards are perfect for people who can’t qualify for a regular credit card. Often poor financial decisions from the past can prevent people from getting new credit; this is where a secured credit card can be extremely helpful. The deposit required for a secured credit card lessens some of the risks for the credit card company which in return allows them to approve people who typically would be rejected.

Furthermore, if you have zero credit history then you might experience some difficulty finding a credit card company or bank that will approve you. Because of the deposit associated with a secured credit card you’ll be more likely to get approved even if you have no credit history. People who have zero past experience with credit often find that they are able to benefit the most from secured credit cards. Secured credit is a great financial stepping stone; they provide second chances and allow the holder to build their credit from the ground up.

What If You Have Bad Credit?

Bad credit is a tricky problem, especially if you have any delinquencies or collection accounts. Don’t lose all hope yet, a secured credit card will help you turn your financial situation around it just might take more time then you thought. There are several things you can do to help your credit improve, both while you apply for a secured credit card and after you are approved.

  • If you have other maxed out credit cards, stop using them right away.
  • Get informed about your own finances, request a copy of your credit history and find out what your credit score is.
  • Create a budget and start tracking your progress.
  • Use your secured credit card responsibly and pay it off in full and on time every single month.

Keep in mind that secured credit cards don’t affect your credit score any differently than regular credit cards so it’s up to you to work hard and keep committed to improving your credit and becoming debt free.

The most important step in improving your credit; whether it’s with a secured credit card or not, is accepting the responsibility and starting the process right away, the sooner you start the sooner you’ll be on your way to a better financial future. Your credit score is the heart of your financial life, treat it well and you’ll reap the benefits.

Learn more about secured credit cards here, or get started with your application today.


Rating of 5/5 based on 4 votes.

Caitlin is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security. One of the main ways she’s built good financial habits is by budgeting and tracking her spending through the YNAB budgeting app. She also automates her savings so she never forgets to put aside a portion of her income into her TFSA. She believes investing and passive income is key to earning financial freedom. She also uses her Aeroplan TD credit card to collect Aeroplan points so that she can save money when she travels.

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