Today we had a question come in from a reader that asked, “does a secured credit card immediately boost your credit rating?”
The question is actually a little more complicated than it seems. Yes - secured credit cards will help your credit score, if the card company reports to the credit bureaus. However, No – this isn’t going to help immediately.
A few years ago I got myself into a real credit mess. My credit score was around 500 and credit card companies wouldn’t approve me for cards. I didn’t have a ton of options, so I started looking at secured cards. I finally found two secured credit cards that worked for me – they both reported to the credit bureaus. It only took about 2 months for me to see a difference on my credit report.
Although my credit started to improve, there were a lot of derogatory items that needed to drop off before my credit would look outstanding. Fortunately, within six months I was able to get some unsecured credit cards. That helped me to develop my credit history even further, without the fees and higher interest of a secured card.
As time goes on, derogatory items become less important – even though they still affect your score. A few years ago I needed to take out an auto loan for around $25,000. I had some bad stuff on my credit report, in fact I had stuff that was more than 90 days late. Fortunately for me, that stuff was a few years old and I had shown a few years with no late payments. My credit score was still suffering, but the banks trusted me because of my obvious turnaround.
If you take out a secured card, you can plan on seeing some improvement within about two months. Make sure that you never pay that card late – ever! Within six months or so you will start to get offers for other cards and they will be much better cards. Take out one or two of those and again, never pay them late. Within a short year or two, you’ll be trustworthy to a bank and you’ll be able to get the financing that you need again.
If you’re looking for a quick bump in your credit score, the best option out there is to pay down your debt. If you already have credit card debt, you need to make sure that it’s below 30% of your available credit. That means if you have $30,000 in credit lines, you need to have less than $10,000 on them, otherwise you are affecting your credit score negatively.
Since almost 1/3rd of your credit score is calculated with this metric, you can really make your score tank by using all of your available credit.
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I disagree with this article. I just had my credit score raised by a company who only deals with “seasoned tradelines” and it worked beautifully. They told me upfront that if I had any “bad marks” against my credit that they would be happy to refer me to a trustworthy company before they would reccomend raising my credit score with there method. It sounds like this guy got bad advise as I am extremely happy with my new score and have already been aproved for a lower payment on my car and a separate loan I could not get before my credit score was raised!
Oh I see, so you think that people should pay $2,000 to rent someone’s credit instead of taking control of their own? Lol that’s ridiculous.
No actually renting someone’s credit is not ridiculous!! It’s a great idea to be able to give you the financial help you need to clean up your own credit. Please leave the contact information for the company you used, Thank you.
Paying someone $2000.00 to use someones credit is absurd. For $2000.00 you can open 3 secured credit cards, keep them all at 1/3 of their available credit and pay down 2-3 of the lowest collection accounts. Boost your credit by 80 points in a couple months, and a couple hundred in a year.