Do Secured Credit Cards Build Credit History?

Quick Answer

A secured credit card may help you build credit under the right conditions, especially if you can convert it to an unsecured card. Taking other steps to improve your credit may be effective, too.

College students checking credit
Dear Experian,

What is your opinion about using secured credit cards to improve credit history, especially if there is no current history?

- PAS

Dear PAS,

Opening a secured credit card account can be a very good way to start building or improving your credit history, especially since secured cards tend to be easier to qualify for than a traditional credit card account.

How Does a Secured Account Work?

A secured credit card works the same as an unsecured card, with one exception: To open a secured credit card account, you must provide at least a minimum required deposit to the card issuer. They will then issue you a card with a limit often equal to your deposit.

That money is what "secures" the account. If you stop paying your bill, the lender can use the deposit to cover the amount owed. Because providing a deposit decreases the lender's risk, secured cards can be easier to qualify for than typical, unsecured cards.

If you manage the secured account well, making charges and paying the bill on time each month, the lender may eventually convert the account to an unsecured credit card account.

Before opening a secured credit card account, ask the card issuer if it reports the account to the credit reporting companies (Experian, TransUnion and Equifax). Some may not. If they do not, it will not help you build a credit history.

However, the lender may start reporting the account if it is converted to a standard, unsecured, credit card account. This way, even if it is not reported initially, a secured card can be a way to get your foot in the door to start building credit.

One important caution, though, is to be certain you are applying with a reputable company. Beware of online offers that sound too good to be true. If you have an account with a bank or credit union that offers a secured card, applying with them might be a good place to start.

Other Ways to Start Building Credit

Opening a secured credit card can be a great first step to establishing credit, but there are other options as well:

  • Ask a family member to cosign a small loan. If you have a trusted relationship with a family member who has good credit, asking them to cosign even a small loan can help you begin building your credit. Keep in mind that any late payments you make will appear on their credit report for seven years as well as yours, so it's critical that you make every payment on time.
  • Ask a friend or family member to add you as an authorized user. Not all lenders report authorized-user accounts to the credit reporting companies, but many do. Although you are not responsible for making payments on the account, being an authorized user on someone else's account can help you build your credit report.
  • Add your on-time utility and streaming service payments. If you have utility, cellphone or streaming service accounts in your name, you can sign up for Experian Boost®ø to add that payment history to your Experian credit report, which can increase your credit score. This can be especially beneficial if you have a thin credit file with fewer than five credit accounts.
  • Sign up for Experian Go™. If you don't yet have a credit report in your name, Experian Go™ lets you create an Experian report and then helps you find the best path for establishing credit and helping you begin your credit journey.

Improving Your Credit History

If you're trying to improve your credit scores because you've had credit difficulties in the past, the best way to get started is to make all your payments on time going forward, bring any past-due accounts current as soon as possible and start paying down outstanding credit card balances.

If you haven't already done so, requesting your free credit report and free credit score from Experian can also help. Your credit score will come with a list of the risk factors currently impacting you the most, so you'll know what specific changes you can make to start increasing your scores.

Thanks for asking.

Jennifer White, Consumer Education Specialist

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