Credit building
If you’ve found yourself with bad credit while seeking a new credit card, you might find that your options are limited. Fortunately, a secured credit card can offer a straightforward path to improve your financial situation, build your credit over time, and open the possibility of obtaining a traditional unsecured credit card.
By Pamela Kohl
November 1, 2024
A "bad credit score" typically means a score of 580 or below on the FICO scale, making it challenging to get loans or credit cards. This low score often results from missed payments, high credit card balances, or other financial issues and can lead to fewer approvals and higher interest rates. However, some credit cards are better suited for those with bad credit. Secured credit cards are especially useful for rebuilding credit because they are easier to obtain and may come with benefits like attractive rewards and/or no annual fees.
A secured credit card is a type of credit card that requires a refundable cash security deposit, which directly sets the card's credit limit. Unlike traditional credit cards, where the limit depends on creditworthiness and income, a secured card's credit limit is usually the same amount as the cash security deposit. For instance, a $100 deposit will give you a $100 credit limit.
Secured credit cards are designed for people looking to establish or rebuild their credit. This often means they don't require a credit check or a specific credit score for approval. So, if you've had credit struggles in the past, don't worry—you can still pay for expenses that require a credit card, like renting a car or booking a hotel. Many secured cards even offer upgrade paths to unsecured cards, making them a solid choice for individuals who may not qualify for traditional credit.
If a secured credit card seems like a good fit for you, here’s how you can apply:
Secured credit cards require an upfront cash deposit, so determining how much you can afford is crucial. If you need help deciding how much to put down, consider starting with a smaller amount, like $100. As your credit improves, you can always increase your deposit to raise your credit limit.
Look into various secured credit cards to find one that suits your needs. Compare deposit requirements, fees, interest rates (APRs), and rewards or benefits. If you have a lower score, try checking out cards that don't require credit checks.
If you're deciding between a few cards, select the one that best fits your needs and personal budget. We recommend choosing a card that reports to all three major credit bureaus (Equifax, Experian, and TransUnion) to ensure your credit history is accurate and up-to-date. That way, you'll never have to wonder what lenders will see when you start applying for different types of credit down the line.
If you’d like to apply for a secured credit card with OpenSky, all three of our options feature an 89% approval rate1. Plus, there’s no credit check required.
You can apply for a secured credit card online through the card issuer's website. When filling out your application, you’ll likely need to have this information on hand:
Once you've been approved for a secured card, fund it with your cash security deposit. Keep in mind that you may need to pay additional fees, such as application, processing, or annual fees, to open your account. The good news is that you can pay these with a debit card, so all you have to do is ensure you have enough funds to cover the initial amount.
Using your secured card responsibly can boost your credit score and help you achieve better credit options and rates for future loans, such as car or home financing. Here are the actions you can take to set yourself up for success.
Using your secured card regularly and paying off the balance on time is critical to building your credit. To establish good habits, try starting with small purchases, such as paying for a monthly streaming service subscription.
Your credit utilization ratio is the percentage of available credit you currently use. Aim to use 30% of your available credit limit at most. This shows lenders that you can stay on top of your spending, which can help raise your credit score.
Always pay your credit card bill on or before the due date to avoid late fees and negative marks on your credit report.
Carrying a balance on your card can increase your credit utilization ratio, which might lower your credit score. If you can't pay your bill in full each month, try to make the minimum monthly payment and pay down the balance as quickly as possible.
Pamela Kohl is the Vice President of Marketing at OpenSky. With over 25 years experience in financial services, Pamela has worked closely with banks, alternative finance, and other fintech platforms to develop core banking services, as well as establish new card programs, lending programs, and global payments platforms. She has been nationally recognized for creating innovative solutions, leveraging new markets, and developing winning strategic partnerships. Pamela earned a B.A. from Marshall University, summa cum laude, and M.A. in International Economics from the University of Miami, where she graduated with Distinction.
1 Based on the last 6 months, OpenSky Secured Visa® Credit Card average approval rate is 89.01%. Individual approval results may vary.
