In a previous article I shared how you can boost your credit score up to 90 points in 90 days by becoming an authorized user. While this method is hands down the fastest way to raise your score, it’s not the only underrated credit-boosting hack. Secured credit cards are another way to significantly raise your credit score in as little as six months.
In this article, I’ll discuss how secured credit cards work and share the top three secured credit cards for those looking to raise their credit score fast.
What is a secured credit card?
A secured credit card is a credit card that requires an upfront cash security deposit when you open an account, usually between $200–$2,500. In most cases, your initial security deposit becomes your total credit line for the card. Because this upfront deposit mitigates the risk for the lender, secured credit cards are available to those with no or very poor credit, making them a credit tool for rebuilding your credit after debt, debt collection, and bankruptcy.
Because your payment history is the largest factor influencing your credit score (accounting for 35% of your overall score), opening up a new credit line through which you can make on-time payments is one of the faster ways to repair your credit score.
The security deposit you make should not be used to pay for your purchases. If you do decide to apply for a secured credit card, you should make sure you have enough cash flow coming in each month to pay for your purchases in full. If you don’t pay your bill on time, the issuer will take your initial deposit and the interest can quickly pile up, leading to more debt.
After six months of on-time payments, many secured credit cards will return your initial security deposit and graduate you to an unsecured credit card with a higher limit. Assuming you make your payments on time every month, this six-month “training” period can significantly boost your credit. According to one of our clients, her credit score went up by more than 125 points in six months by making on-time payments to her Discover It secured card.
Selecting The Best Secured Card for You
The most important thing to look for when choosing a secured credit card is that your creditor reports to all three major credit bureaus (Experian, TransUnion, and Equifax). If they don’t, then your on-time payments will not be accounted for and this strategy will have little effect on your credit score. All of the cards below report to the three major credit bureaus.
Another important question to ask yourself is how much money can you tie-up in a down payment while still having enough liquid cash available to pay off your bill every month. Being approved for a secured card will not boost your score automatically. Establishing a record of consistent on-time payments will. There’s no sense in putting $2,000 down for a higher credit limit if you don’t have more than $100 in extra cash every month to pay off the bill.
Since you are using this card for credit rebuilding purposes, you should plan to use it sparingly and follow the same credit utilization rule for unsecured cards. You should limit your purchases to 30% or less of the available credit line, meaning if you get an unsecured card with a limit of $500, you shouldn’t rack up more than $150 in charges each pay cycle and pay off your balance every month. Keep this in mind when selecting your down payment.
Lastly, you should choose a card with a “graduation date,” after which your creditor will return your security deposit to you and upgrade you to an unsecured card. Again, this graduation is not guaranteed: you’ll need to prove that you’re capable of using your card sparingly and paying it off every month. That said, if you do, this graduation will be a big milestone in your credit repair journey!
Let’s jump into our top three recommended secured credit cards.
Zolve Azpire Card – 0% APR
Zolve is an emerging fintech company whose mission is to enable fair access to financial products for global citizens. While Zolve may be a newcomer in the credit space, their credit cards are backed by Mastercard security, and their checking accounts are FDIC insured.
The Zolve Aspire secured credit card doesn’t require a credit check or a Social Security number to apply, making it the perfect secured card for non-U.S. citizens and those who’ve previously filed for bankruptcy.
Why we like it:
Unlike other secured credit cards, Zolve allows you to customize your initial deposit from the very beginning and increase it every billing cycle if you wish. It’s the only secured card we’ve found to offer 0% APR, and no late fees.
The Zolve Azpire card also offers a shorter graduation timeline, with the opportunity to graduate to one of their unsecured credit cards (up to $5,000 credit line) in as little as four months!
Things to consider:
The Zolve Azpire card does not guarantee your deposit will be returned unless you upgrade to one of their unsecured cards and close your Azpire account.
Compared to other secured credit cards, the Zolve Azpire offers limited cash-back perks. They advertise 10% cash-back, though this cash back is limited to those brands partnered with Dosh. If your main purpose for using a secured credit card is to rebuild your credit, we wouldn’t focus too much on the perks!
Discover It – 28.24% APR
The Discover It secured credit card has a long track record of happy customers, reliable graduation cycles, and generous perks. While no credit score is required, you will need a social security number to apply for this card, making it best suited for United States citizens.
Why we like it:
Initial deposits range from $200-$2,500 and offer automatic reviews every seven months, during which you will be considered for an upgrade to an unsecured credit card, and subsequent increases in your credit line. Discover is also transparent in their processes: after “six consecutive on-time payments and six months of good status on all your credit accounts” your initial deposit will be returned to you (Discover).
The Discover It card also offers 2% cash back on gas station and restaurant purchases (up to $1,000 per quarter) and 1% cash back on all other purchases. They also have a cash-back match for the first year for new customers, meaning if you earn $500 in cash back, they’ll give you another $500. Great welcome perk!
Things to consider:
The APR for the Discover It card is hefty, coming in at 28.24% for 2024. This APR won’t matter if you pay off your balance on time every month, but it’s important to keep in mind. Additionally, there is a $40 penalty for any late payments, so be sure to set up auto-pay!
CapitalOne Platinum Secured – 30.74% APR
CapitalOne has been one of the leading banks in the credit-restoration space. Their Platinum secured card is a testament to this.
Why we like it:
With starting deposits as low as $49, $99, and $200, this is a great card for those who need to start small. Unlike other secured credit cards, Capital One is willing to take a risk. Even if you deposit just $49, they may give you $200 initial credit line based on creditworthiness.
Similar to the Zolve Azpire card, you can also deposit more money (up to $1,000) to increase your credit limit.
Things to consider:
Unlike other secured credit cards, CapitalOne does not graduate users to an unsecured card or refund deposits. That said, they offer an automatic credit line after six months of full, on-time payments. This means they’ll increase your available credit line without asking for more money down. After six months to a year of on-time payments, you might consider applying to Capital One’s Quicksilver card, which is an unsecured card specifically designed for users with Fair credit.
This secured card also has a $40 late fee and the heftiest APR of all secured credit cards (30.74% for 2024), so be sure to set up automatic payments!
Recap
It’s easy to get overwhelmed by the various options and perks when shopping for a secured credit card, but if you follow these rules, you’ll be in good shape no matter which card you choose:
Rule #1 – Pay on time, every time. Set up auto-pay so you’re never late!
Rule #2 – Pay your balance in full every month.
Rule #3 – Keep credit utilization low (less than 15-30% of your total secured credit line).
Rule #4 – Use the card frequently, but for small purchases only.
Rule #5 – Never carry a balance. If you do, you’ll likely be subject to high APR, and this strategy will further hurt your credit score.
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