Mr Credit Card
You can build up your credit to a good score with a secured credit card as little as 6 months to a year if your credit report is clean. That means that those with no credit history or even folks who have been discharged from chapter 7 bankruptcy and start with a clean slate can use a secured credit card wisely and improve their scores quickly.
Those who have bad reports on their credit reports like collections, charge offs and recent late payments will take a longer time to rebuild.
In this post, we will explain this in greater detail and map out what you can do to rebuild your credit faster with a secured credit card.
Those with clean credit reports
As we mentioned in the introduction, those with clean credit reports can improve their credit scores quickly. I'll give you an example of my son when he first went to college. I first gave him a credit card as an authorized user on my Amex. And I set a $200 limit for unexpected expense. He was expected to work to pay for his daily spending money. After a couple of months in college, he applied for a Discover it chrome for student and was approved. He applied for a bunch of other cards. Most declined him but he got approved for the BankAmericard Travel Rewards for students. After about six months, his score is 700. Here are more examples from people who have left comments about secured credit cards they have.
I applied for the regular Discover it and was denied due to "insufficient credit history". So I decided to apply for this secured card........After 11 months, I got an email from Discover telling me that have sent a refund for the initial deposit and that my card was now unsecured. My credit limit had also been increased to $1000. I checked my score is it was now 690 and the credit report has also reported as unsecured just after I was informed of the changes.
I applied for this card (Capital One Secured) after I graduated from college (where I did not have any credit card and hence did not build my credit at all). ....... I decided to put down a $1000 deposit and got a $1000 credit line. Fast forward one year later and my score is now 700. I just applied for the Chase Freedom and was given a $10000 limit.
Those with Baddies on their report will have a more difficult time
If your credit has tanked because of late payments, collections and charge offs, then it will take more time for a secured credit card (or any credit card or loan) to rebuild your credit.
Though you may have a low credit utilization ratio and pay your bills on time and in full, late payments, collections and charge offs takes a while to be removed from your credit report and only with time can the negative impacts become less and less. You may be using your credit card responsibly, keeping your credit utilization low and paying in full and on time every month but somehow, your rate of improvement will simply be different from someone else with no credit history and has no negative remarks on their credit report.
If you are caught in this situation, there are only two ways to improve your credit score quickly. The first is to improve your cash flow situation so you can continue paying off what you owe. This might entail getting a second job or massively cutting expenses but improving your cash flow is so important in both your overall financial health and your credit score.
The second thing could do is to negotiate with collectors and settle those debts. Settling those collection accounts and charge offs will also lead to an increase in your credit score. In fact, for rebuilders, doing this has probably the most impact.
What's Next
How many secured credit cards do you need to build credit?
What is a secured credit card and how does it work?
Pros and Cons of Secured credit cards
How does deposits on secured credit cards work?
What should a typical deposit be on a secured credit card?
How to use secured credit cards wisely?