How Fast Can a Secured Credit Card Build Credit?

If you have a low credit score or no credit history, the good news is that a secured card can help you build a strong credit score. So as long as you make your payments on time, those payments will be reported to the credit bureaus and slowly but surely, your credit score will rise.

You’ll have a particular advantage if you’re starting from scratch with credit and your secured card is your first credit account. You may well be able to build up a fair or even good credit score within six months of using your secured credit card responsibly, although 12-18 months is often a more realistic timeline.

Since a secured credit card is specifically created to help build or repair credit and all payments are reported to the credit bureaus, a person starting with no credit could have a credit score they could use to apply for for an unsecured card in just a few months – and that’s if the bank doesn’t offer you an unsecured card first since many instant approval credit cards exist.

How Long Does it Take to Rebuild Bad Credit With a Secured Credit Card?

If you’re trying to repair bad credit with a secured card, it can take a little longer. Sure, a secured card is just as easy to obtain, especially if you have no problem putting up the deposit that will serve as your credit limit. In fact, coming out of a bankruptcy, a secured card will likely be the only credit card you’ll have a chance to qualify for.

That being said, since you were once a credit risk and maybe coming off of a bankruptcy or consumer proposal, getting back to a decent credit score won’t be quite so easy. It usually takes at least 12 to 18 months of consistent, positive credit bureau reporting, based on making regular, on-time payments, before you’ll start to see your credit score climb. 

It’s hard to give an exact timeline as to how fast your credit score will recover as it really depends on your individual situation, like how many late payments are on your credit report, if there’s a consumer proposal or bankruptcy on your file, etc. That being said, if you keep making your payments on time and using your secured card responsibly, there’s no reason why your score won’t eventually start rising, so be patient and keep at it! 

To give your credit score a boost, aim to keep your credit utilization under 30%. That means only using 30% of the total amount of credit you have available to you. So if your secured card has a limit of $500, aim to keep your balance below $150.

How Does a Secured Credit Card Help You Build Credit?

If you’re using a secured credit to build or repair your credit score, it’s a good idea to know how it works.

First, when obtaining a secured credit card, you’ll need a deposit at the ready. This deposit is often a minimum of $500, and this amount will become your credit limit.

The reason secured cards work this way is because the deposit provides the issuer insurance against default by the borrower. Since most people who apply for secured cards are noted credit risks, either with bad or no credit, the issuer  will use the deposit to pay back the balance in the event the borrower is unable to pay off the credit card on the prescribed timeline.

Meanwhile, if you do make regular payments, this good credit behaviour will be reported to the credit bureaus, which will then raise your credit score incrementally, restoring your credit-worthiness and borrowing power. This is because a secured credit card is treated exactly like a traditional, unsecured credit card by the credit bureaus.

It's useful to note that, if you close your secured credit card account, you will receive your security deposit back.

How Many Points Will a Secured Credit Card Raise Your Credit Score?

This is a difficult question to answer as the answer depends on your individual credit situation. 

What we do know about how a secured card impacts your credit score is that paying your balance on time is the biggest factor that goes towards raising it. Our best advice is to start making regular payments on your secured credit card and using Borrowell to track your credit score for free every week, so you can monitor and track your progress.

How Much to Deposit on a Secured Credit Card?

The amount to deposit on a secured card is up to you as the borrower, but different issuers set different minimums for their secured credit cards. The most common minimum deposit is usually $500, but there are cards with a lower deposit requirement, such as Capital One's Guaranteed Secured Mastercard ($75 minimum deposit) and the Refresh Financial Secured Card ($200 minimum deposit). We’ve put together a handy comparison of Canada’s top secured cards.

Remember though, whatever you choose as your deposit will become your credit limit, so you will have to balance the amount you can afford as a deposit with the amount you’d like to be able to borrow against. 

How Often Should You Use Your Secured Credit Card to Build Credit?

A secured credit card can be used in exactly the same way as a traditional, unsecured credit card, so you can use it as little or as much as you want, providing you’re making your payments on time. However, in order to boost your credit score, it’s recommended that you use your secured credit card at least a few times every month, but really there’s no reason why you shouldn’t use your secured card for all your transactions, as long as you’re not spending more than you can afford to pay off.

A common misconception is that you should carry a balance every month to help boost your credit score. In fact, the opposite is true, and we recommend that you pay off your balance in full each month.

How Much Credit Should You Use With a Secured Credit Card?

If you’re looking to build or repair your credit score, we recommend keeping your credit utilization ratio below 30%, which means not using more than 30% of the total credit available to you across all your credit accounts. So if you have a $500 limit on a secured credit card, it’s best to keep your balance below $150. This demonstrates to lenders that you can be trusted to use your credit sparingly and responsibly.

The Bottom Line

Using a secured credit card is a great strategy for building your credit if you don’t have any credit history or are repairing bad credit after a negative financial event. Secured cards are easy to get approved for and, as your payments will be reported to the credit bureaus, they can help you build a strong credit report and restore your credit-worthiness.

However, you must manage your secured card responsibly to see these benefits, just as you would with a traditional, unsecured credit card. Any missed or late payments will have a negative effect on your credit score, so be sure you’re only spending what you can afford to pay back comfortably.

If you keep these tips in mind and use your secured card responsibly, in time your credit score will start to rise.