If you’re applying for a secured credit card, then you probably already know that your credit isn’t great (you might not have been approved previously for an unsecured credit card) or you have no credit history at all yet. But do you know what your actual credit score is or what a good credit score range is?
If not, you can check your credit score for free using a number of sites, such as Credit Karma or Credit Sesame. Once you know your number, it’s time to see where you fall in the range. Your goal should be to move up into the “good” and “very good” range.
FICO Score Range:
- Exceptional: 800+
- Very good: 740-499
- Good: 670-739
- Fair: 580-669
- Poor: 300-579
What happens if my credit score is “fair” or “poor”?
When your credit score is “fair” or “poor” you may find that many of your credit-related options are limited — you may not qualify for an unsecured credit card, it may be harder to get approved for a mortgage, your interest rate on a new car may be higher, you may be denied for a personal loan, and more.
Even when you enter the “good” range, you still want to work to get your credit score in the “very good” range. With a good credit score, you’ll probably get approved, but you may not get the most favorable rates.
How do I know what’s affecting my credit score?
To understand your relationship with credit, you’ll need a copy of your credit score. You can request your report for free from one or all three of the major credit bureaus once a year through AnnualCreditReport.com – the only authorized website to request a credit report.
Look over everything on your credit report to better understand how you’ve used credit in the past:
- Have you paid late?
- Do you miss payments altogether?
- Is your credit history not that long?
Dig in and look for areas where you can make improvements.
What can I do to improve my credit score?
Once you understand your credit score and your history with credit, it’s time to take proactive steps. First and foremost, you want to make sure you never miss a payment or make a payment late. Payment history accounts for the largest portion (35%) of your total credit score. Next, you’ll want to keep your balance low since credit utilization – the amount you owe vs. the amount of credit available to you – is 30% of your total credit score.
In short, you should be paying your balance off in full and on time each month. In order to avoid temptation, don’t put more down for your security deposit than you can pay off. With secured credit cards, your credit line is often equal to your security deposit (minus fees). If you want to aim high for that 800+ score, you can follow the four habits of people with great credit:
- Make your payments on time
- Carry low balances on your credit card
- Apply for credit only when you need it
- Develop a long credit history
How do I know I’m making a difference?
You’ll want to make sure that whatever card you choose is updating all three of the credit bureaus on your credit status. All of the secured credit cards on our list report regularly to all three agencies.
Next, you’ll also want to regularly check your credit score through one of the sites above, or through your credit card company if they provide that feature (like the Discover it® Secured Card - No Annual Fee ). Lastly, you’ll want to check your credit report regularly (at least once to three times a year) to ensure that everything is being reported on time and accurately. If you see any discrepancies, you can dispute them.
Building positive credit takes time – it’s a journey. Even those with the best scores have been using credit for more than 10 and a half years, on average, according to FICO. Don’t get discouraged if things seem slow at first. Establishing good credit habits will help you in the short-term (no interest when you pay in full and on time!) as well as the long-term (a better credit score).
Four signs it’s time to upgrade to an unsecured credit card
Many of the best secured credit cards will upgrade you to an unsecured card after a period of responsible use. In some cases, you may need to request a review, while some cards have no upgrade opportunity meaning you may need to apply for an unsecured credit card directly.
Here are four signs you may be ready to upgrade:
- Your credit score has improved. As your credit score improves, you can consider other types of cards. Ideally, you’ll want to get it into the 600s before you start looking at unsecured credit cards for fair credit or average credit. As you get closer to the 700s, you can consider cards for good credit that also offer rewards and perks.
- You’ve made your payments on time. Paying your credit card balance on time (bonus if you made payments in full each month) for at least a year shows lenders that you’re trustworthy with credit and that you take building, or rebuilding, your credit seriously. Making payments on time and not missing a payment accounts for about one-third of your credit score – so make sure to do it!
- You’ve made a credit card part of your financial routine. You can’t build credit if you’re not using credit, but you need to be doing so responsibly. Use your card at least once a month at minimum and treat it like a debit card – only charge what you can afford to pay. Even charging as little as $20 a month and paying it off in full and on-time will build positive credit.
- You haven’t had any other hard inquiries. A hard inquiry is when a lender pulls your credit report as part of an application (credit card, car loan, student loan, renting an apartment, etc.). Hard inquiries stay on your report for two years, and too many can actually dock your credit score. If you want to check out an unsecured card without risking a hard inquiry, see if they offer a pre-qualification option. This soft inquiry won’t hurt your credit score.
The best secured credit card can be a powerful financial tool.
Secured credit cards represent an opportunity to build or rebuild your credit. While you won’t have the lower APR, higher credit limit, and rewards that are common with unsecured cards, you probably won’t miss these perks if you use your card strategically and responsibly.
For anyone with a military affiliation, we highly recommend the USAA Secured Card® American Express® Card and the USAA Secured Card® Platinum Visa®. Otherwise, you’ll want to identify what matters most to you in a secured credit card. If it’s low fees, try the Capital One® Secured MasterCard®; if you want a low APR, look at the First Progress Platinum Prestige MasterCard® Secured Credit Card. If you’re serious about quickly graduating to an unsecured credit card, consider the U.S. Bank Secured Visa® Card.
If you want to learn more about your credit score, what affects it, and how it affects you, you’ll find everything you need to know in our credit score guide. And if you’re interested in other financial tools that may be available even if you have bad credit, we also offer guides to the best bad credit loans and bad credit auto loans.