Sign up for our FREE Monthly Email Newsletter
In addition to keeping in the financial know, you may be interested in checking your credit score and report.
¹The credit scores provided under the offers described here use the Equifax Credit Score, which is a proprietary credit model developed by Equifax. The Equifax Credit Score and 3-Bureau scores are each based on the Equifax Credit Score model, but calculated using the information in your Equifax, Experian and TransUnion credit files. The Equifax Credit Score is intended for your own educational use. It is also commercially available to third parties along with numerous other credit scores and models in the marketplace. Please keep in mind third parties are likely to use a different score when evaluating your creditworthiness. Also, third parties will take into consideration items other than your credit score or information found in your credit file, such as your income.
²The Automatic Fraud Alert feature is made available to consumers by Equifax Information Services LLC and fulfilled on its behalf by Equifax Consumer Services LLC.
³Equifax Credit Report Control™ is only available while you have a current subscription to Equifax Complete Premier. Locking your credit file with Equifax Credit Report Control will prevent access to your Equifax credit file by certain third parties, such as credit grantors or other companies and agencies. Credit Report Control will not prevent access to your credit file at any other credit reporting agency, and will not prevent access to your Equifax credit file by companies like Equifax Personal Solutions which provide you with access to your credit report or credit score or monitor your credit file; Federal, state and local government agencies; companies reviewing your application for employment; companies that have a current account or relationship with you, and collection agencies acting on behalf of those whom you owe; for fraud detection and prevention purposes; and companies that wish to make pre-approved offers of credit or insurance to you. To opt out of such pre-approved offers, visit www.optoutprescreen.com/.
4We will require you to provide your payment information when you sign up and we will immediately charge your card $4.95. After that, we will charge the card $19.95 for each month you continue your subscription. You may cancel at any time; however, we do not provide partial month refunds.
Equifax® is a registered trademark and Equifax Complete™ Premier is a trademark of Equifax, Inc. © 2014, Equifax Inc., Atlanta, Georgia. All rights reserved.
If you have poor credit history, you may have difficulty qualifying for a credit card. Missed payments can show up on your credit report and negatively impact your credit score, making you appear risky to lenders and credit card companies.
A secured credit card is one option for you to obtain a credit line to help you re-establish your credit and improve your creditworthiness.
The terms “secured” and “unsecured” do not refer to privacy or security issues. Instead, they refer to the requirement of a security deposit as collateral. For example, an initial cash deposit of $300 will become the credit limit of your secured card. On the other hand, an unsecured credit card comes with a credit limit that is determined by factors like your credit history and income.
Before shopping around for a secured credit card that meets your financial needs, consider these five tips:
1. What are the terms, fees and charges associated with the card?
While secured credit cards generally carry all of the same fees associated with unsecured cards—including application, annual, and transfer fees—the rates are normally higher, says Deatra Riley, financial education manager at CredAbility, a nonprofit credit counseling and education agency.
Make sure you consider how much of your credit limit will be drained by fees. Some secured credit cards, for example, only allow a $500 deposit and then require that $99 be put towards the card’s annual fee, Riley says. In this case, only a $401 credit limit would remain for charging.
Interest rates are another important factor to consider. While many companies are currently making secured credit cards attractive by offering them at low interest rates, those rates may increase significantly after about 12 months, Riley says.
2. Will my payment history be reported to the three national credit reporting agencies?
One of your primary reasons for opening a secured credit card may be to restore your credit by continually making on-time payments. You’ll want to make sure the card issuer reports your payment history to the three national credit reporting agencies so you get this benefit.
3. Can I use the deposit for monthly payments?
A common misconception associated with secured credit cards is that the initial deposit can be used to make monthly payments if the consumer has insufficient funds, thereby avoiding a late fee or additional interest, according to Riley.
“The deposit is just going to secure the credit limit,” Riley says, “The client is still responsible for making the monthly and timely payment for the purchases they make.”
If you are unable to make a payment, the financial institution will charge a late fee or other penalty that is associated with your contract.
4. Will I be able to use the card anywhere?
Not all secured credit cards come with a major credit card logo, like Visa or MasterCard. If you plan to use your card extensively—for hotel reservations, airfare, or car rentals, for example—picking a secured card with a major credit card logo will help ensure that your payment is accepted.
5. What is my financial goal?
Because one of the main reasons for having a secured credit card may be to increase your credit score, Riley says that it’s important for you to evaluate your current financial state—including household budget, personal savings, and credit score—before opening an account.
By having a clear goal in mind before using a secured credit card, it will be easier to monitor how your creditworthiness and financial state change as your payment history is reported to the credit bureaus.
But Riley cautions that a secured credit card should not be used as a “regular means of credit” unless the user is a college student or recent graduate establishing credit for the first time.
The amount of time it takes for a secured credit card user to qualify for an unsecured card will be based on the individual’s payment history. Riley says that after making on-time payments for six months to one year, a consumer may be able to start thinking about applying for an unsecured card.
Joslin Woods is a researcher, writer, and web producer at Think Glink Publishing, with a background in print and digital media. Previously, Joslin worked as a news reporter for the international news agency Agence France-Presse and as a freelance reporter for the Sun-Times News Group. She is a graduate of Vanderbilt University and Northwestern University, where she received a master’s degree in journalism.
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.
Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.