If your credit score is under 620, you’re far from being alone. According to a study by the Consumer Financial Protection Bureau, about 21% of African Americans have a credit score below that threshold. But here’s the good news—there are effective ways to improve your credit score, and one of the most powerful tools you can use is a secured credit card. Lets break down exactly how using a secured credit card can boost your score and help you on the path to better financial health.
How Does a Secured Credit Card Work?
A secured credit card lets you use your own money to help build your credit. Here’s how it works: you put down a cash deposit that becomes your credit limit. So if you deposit $500, your credit limit will be $500. Since you’re essentially borrowing against your own money, it reduces the risk of defaulting, which is why secured credit cards are a great option for people with low credit scores.
By consistently using and paying off this type of card, you’re demonstrating responsible financial behavior, which the credit bureaus love to see.
Why Secured Credit Cards Help Your Credit Score
- Establishing a Positive Payment History
Payment history makes up 35% of your credit score, so it’s crucial to get this right. A secured credit card helps you build that positive payment history by allowing you to make regular, on-time payments. Over time, those consistent payments will raise your score, proving to lenders that you’re responsible with credit. - Lowering Credit Risk
Since you’re using your own money as collateral, there’s a lower risk for both you and the lender. This setup reduces the chance of falling into debt, as you can only spend what you’ve already deposited. - Improving Credit Utilization
Credit utilization—how much of your available credit you’re using—accounts for 30% of your credit score. By keeping your usage low (ideally under 30% of your credit limit), you’ll improve your score even faster. With a secured card, this is easier to control since your spending limit is based on your deposit.
Best Secured Credit Cards to Consider
Ready to start building credit? Here are five top secured credit cards that can help you take control of your financial future:
- Chime Credit Builder Visa® Credit Card – No credit check required, making it a low-barrier option.
- OpenSky® Secured Visa® Credit Card – No credit check and easy approval process.
- Navy FCU nRewards® Secured Credit Card – Best option from a credit union for those with bad credit.
- Capital One Platinum Secured Cash Rewards Credit Card – Ideal for earning rewards while building credit.
- Discover it® Secured Credit Card – Best for Rewards, bonus offer & upgrading
Final Thoughts: Take Control of Your Credit
If improving your credit score is on your to-do list, using a secured credit card is one of the smartest moves you can make. By using your own money and staying on top of payments, you can establish a solid payment history and improve your credit in no time.
Got questions about using a secured credit card to boost your credit score? Drop them in the comments! And don’t forget to check out our other articles for more tips on leveling up your financial game.