How Does a Secured Credit Card Build Credit?

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A secured credit card helps to build credit by allowing the card holder to provide cash collateral to the bank while making payments on time. After a set period of time, a secured credit card will turn into an unsecured credit card. Find out how credit reporting agencies see secured credit cards as an effort towards building better credit with information from a financial adviser in this free video on credit cards.

Part of the Video Series: Credit Cards & Personal Loans
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Video Transcript

Hi, this is Matt McKillen with Innovative Financial Group. A really good question posed to me today was, "How does a secured credit card help you build your credit?" Well, this is how the program works. If you apply for a secure credit card, you're basically giving the lender that's issuing you the card a savings deposit, which they can hold as collateral for the card. If you want a five hundred dollar credit limit, you usually have to give them five hundred dollars cash. Generally they'll hold that money for up to twelve months, then if you make your payments on time after twelve months, they'll release that savings deposit back to you 'cause you've proved your worthiness. The important thing about the secured credit card in regards to building your credit is that, that card will now start reporting to the, all three credit bureaus. So after establishing, maybe six, nine, twelve month payment history of making your payments on time; it does ultimately start building your scores back up and you'll actually find that you'll start getting offers from other credit card companies that want your business on a non-secured basis. So I really think that secured credit cards are very key factor in helping the typical consumers that suffered problems in the past get their credit scores and their credit bureaus back on track. Again, my name is Matt McKillen and I am with Innovative Financial Group.


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