How To Use Secured Credit Cards to Overcome Bad Credit

Building Credit From Scratch

Now, I get it—borrowing against your own money might seem a bit backward at first glance. But trust me, it's all part of the credit-building game. Creditors want to see a proven track record of responsible credit use before they're willing to extend your credit. Secured credit cards offer a safe, almost guaranteed way to start building that track record.

What many don’t know is there are options, even when traditional cards aren't on the table, which you can find below:

• Secured Credit Cards: These cards require a cash deposit that serves as your spending limit. They report your activity to credit bureaus, helping you build credit responsibly.

• Secured Lines of Credit: Similar to secured credit cards, these require a deposit but offer more flexibility in terms of usage.

• Credit Builder Apps: There are numerous apps available that allow you to borrow against your own money. By using these apps responsibly, you can establish a positive credit history.

Why secured credit cards?

This is really one of my favorites! Let’s zoom our focus on secured credit cards.

Secured credit cards can be a total game-changer if you're trying to build your credit. I've seen it firsthand with my own clients. Putting down a refundable deposit lets you access credit on your terms. Now, I get it—borrowing against your own money might seem a bit backward at first glance. But trust me, it's all part of the credit-building game. Creditors want to see a proven track record of responsible credit use before they're willing to extend your credit. Secured credit cards offer a safe, almost guaranteed way to start building that track record.

Sure, borrowing against your own money doesn’t make sense at first. But as long as you make payments on time, that activity is reported to the credit bureaus. Before you know it, your score starts climbing. And you can eventually graduate to an unsecured card and get your deposit back.

Trust me, I know it's frustrating to build credit from scratch. But with a little patience and the right financial tools, you can secure your financial future. Bad credit doesn't have to hold you back. So strap in for some real talk about the power of secured credit cards. I'll share plenty of tips, recommendations, and lessons I've learned along the way—for you and your credit score.

From Credit Denial to Financial Freedom: The Struggle Was Real

When I started my credit repair business over 15 years ago, I knew the struggle of bad credit all too well. But my journey into the world of credit repair didn't start there. In fact, it began during my time in the auto industry.

During my years working in the auto industry, I witnessed countless individuals denied loans due to their poor credit scores. It was disheartening to see hardworking people eager to purchase a car to improve their lives face rejection after rejection simply because of their credit history.

I vividly remember the frustration and disappointment on their faces as they realized that their dreams of owning a car were being dashed by something as seemingly intangible as a credit score. It was a wake-up call for me, sparking a desire to help people overcome these challenges and achieve their financial goals.

Secured Cards Are Saving Grace

I started researching ways to build credit from scratch and discovered secured credit cards. These cards report to the credit bureaus just like regular cards but require a cash deposit that acts as your spending limit. I applied for a few, put down deposits of $200-$500, and used the cards responsibly by keeping low balances. Secured credit cards quickly became my saving grace in the journey to improve my client’s credit score and financial standing.

Here's how they made a significant difference:

1. Accessible Credit Building:

• Secured credit cards provide a practical solution for individuals with limited or damaged credit histories.

• Unlike traditional credit cards, which may be out of reach for those with poor credit scores, secured cards offer a path to credit building.

2. Credit Reporting:

• One of the key benefits of secured cards is their reporting to credit bureaus, just like regular credit cards.

• Every responsible use, on-time payment, and low balance is reported, gradually improving your credit score over time.

3. Cash Deposit Requirement:

• Secured cards require a cash deposit that serves as collateral for the lender, reducing their risk.

• This deposit also determines your spending limit, ensuring that you can't overspend beyond what you've deposited.

4. Incremental Progress:

• Each month of responsible card usage contributed to incremental improvements in my credit score.

• Over time, this progress opened up doors to more favorable financial opportunities, including access to traditional credit cards and loans.

Secured credit cards offer a lifeline to those struggling to build or repair their credit. They provide a tangible means to demonstrate responsible financial behavior, paving the way for improved credit scores and a brighter financial future. In the next section, I’ll be sharing some true-to-life experiences about how secured credit cards can turn your Bad credit around, so standby.

Patience and Persistence Paid Off

After a year of consistently making payments on time, my credit score started getting better. I began receiving offers for regular credit cards, which was a big step forward. Then, after closing my secured accounts, I got my deposits back. It was a clear sign that my efforts were paying off.

This journey isn't just mine; one of my clients, Sarah, went through a similar struggle. She had a low credit score due to financial setbacks and felt stuck. With some guidance, Sarah decided to rebuild her credit using a secured credit card. She made sure to pay her bills on time and keep her balances low.

Over time, Sarah's credit score improved, just like mine did. Eventually, she got offers for regular credit cards and closed her secured accounts. Sarah's hard work paid off, and she saw her credit score rise, opening up new opportunities for her.

Our stories show that with patience and perseverance, it's possible to improve your credit score and build a better financial future.

Helping Others Find Financial Freedom

Now, I help clients in situations like I was in. We review their credit reports, set a plan to dispute any errors and recommend secured cards to establish a positive payment history. It's rewarding to guide people out of credit denial and onto a path of financial freedom. With time and determination, bad credit doesn't have to hold you back. Secured cards provide a lifeline, and with the right habits, the sky's the limit!

Why Secured Credit Cards Are a Game Changer

I hope I was able to convince you how important it is to start with a secured credit card if you are building credit from scratch. As someone who's been in the credit repair business for over 15 years, I've seen secured credit cards work miracles. When traditional credit cards aren't an option due to bad credit, secured cards are your best friend. “Why is that, Joe?"

They report to the credit bureaus

The biggest benefit of secured cards is that they report your payment information to the three major credit bureaus - Equifax, Experian, and TransUnion. This allows you to build a good payment history, which makes up 35% of your credit score. With responsible use, you can raise your score significantly over 6-12 months.

They're easy to qualify for

Secured cards require a cash deposit, so you're not subject to a credit check. You'll get approved as long as you can put down a deposit, usually $200-$500. The deposit amount becomes your line of credit. There's no risk to the issuer, so they're happy to give you a chance.

You can get your deposit back

Once you've used the card responsibly and your credit improves, you may qualify to "graduate" to an unsecured card and get your deposit back. The issuer will review your account periodically and return your deposit if you meet their criteria. This allows you to access more credit and move on from secured cards.

They provide credit limit increases

Some secured cards allow credit limit increases over time without requiring an additional deposit. This shows you're using credit wisely and can handle more. It also boosts your credit utilization ratio, which makes up 30% of your score.

Secured cards provide a path to better credit when all other doors seem closed. If bad credit has been holding you back, open a secured card account and start building a brighter financial future today. You'll be amazed at your progress in as little as a year. There's no reason to delay—your dream life is waiting!

The Power of Building Your Credit Score Over Time

We can all agree that a secured credit card can increase our financial score. So, how exactly can we use secured cards to our advantage?

Using secured cards to establish a credit history

The key is starting with secured credit cards. Unlike traditional cards, secured cards require a cash deposit that acts as your line of credit. So, there's no risk to the issuer, and approvals are much more likely. I recommend starting with a couple of secured cards, maybe putting down $500-$1000 on each. Charge a few purchases each month and pay on time. Do this for 6-12 months, and your score will start to improve.

Keep balances low and pay on time

The most important thing is using your cards responsibly. Keep balances under 30% of your limit, and pay at least the minimum by the due date. Payment history and credit utilization ratio comprise a huge portion of your score. I've seen clients improve 50-100 points in a year just by keeping low balances and perfect payment history.

Credit increases and graduation

As your score improves, you'll qualify for credit limit increases and may even "graduate" to unsecured cards. Keep the same responsible habits, and your score will continue to rise. Many of my clients are in the good to excellent range within 2-3 years of using this approach.

Before you know it, you'll have traditional credit options and the strong score you need to qualify for the best rates. The power is in your hands to secure your financial future, one small step at a time.

Secured Credit Card Options to Choose From

I know you are all waiting for this section. So, what are some secured credit card options you can choose from? Here are a few that I recommend:

• Capital One Secured Mastercard: I'm a big fan of the Capital One Platinum Secured Card. It has no annual fee, and Capital One is known for approving those with bad or no credit. They'll even consider giving you a higher credit line in as little as 6 months if you make on-time payments. With a low deposit requirement and the potential to increase your credit limit after just five months of on-time payments, this card is a great option for building credit.

• Discover it® Secured Credit Card: Another great choice is the Discover it® Secured Card. Discover matches the cash back you earn at the end of your first year, with no limit on how much you can earn. The Citi® Secured Mastercard® is also solid, with credit lines from $200 to $2,500 and a low annual fee. This card offers cashback rewards on purchases, helping you save while you build credit. Plus, Discover automatically reviews your account after eight months to see if you can transition to an unsecured card.

• OpenSky® Secured Visa® Credit Card: This card doesn't require a credit check, making it accessible to those with poor or no credit history. It also reports to all three major credit bureaus, helping you establish credit quickly.

• Citi® Secured Mastercard®: This card offers flexibility with your deposit amount and provides access to Citi's online tools and resources to help you manage your credit.

These are just a few options to consider, but there are many others available. Be sure to compare features and fees to find the best fit for your financial situation.

Once you've used a secured card responsibly for about a year, check your credit score. If it's over 650, you'll likely qualify to "graduate" to an unsecured card. Your card issuer may automatically review your account and refund your deposit, converting your card. If not, apply for an unsecured card with the same bank or a different issuer. Cancel your secured card only after qualifying for an unsecured card to avoid losing your credit history.

Takeaway: Your Path to Financial Freedom Begins Here

Building credit with a secured card takes patience but pays off. I've had clients go from no credit to 700+ scores in two years using this approach. Stay determined, use your card each month pay on time, and don't get discouraged if denied at first for unsecured cards. Keep checking your score and trying again. Your financial freedom is absolutely within reach, even with past mistakes. Secured cards provide a path forward, and with time and responsible use, the doors to unsecured credit will open.

So, in closing, I hope sharing my experiences gives you some ideas on how to move forward if bad credit is holding you back. I've been there before, and it can feel hopeless, but taking the right steps with secured cards and being patient can really pay off. It won't happen overnight, but stay focused on your credit score goals. Before you know it, you'll start getting those pre-approved offers in the mail!

Ready to take the plunge? Reach out to ASAP Credit Repair, and let's embark on this journey together. Your financial future awaits, and secured credit cards are your secret weapon to unlock its full potential.