During an unexpected financial crisis, it can be easy to fall behind on bills and get into debt. With those things happening, your credit score can become significantly lower than usual. Millions of people experienced similar situations during the pandemic and are trying to rebuild their current score back to normal or higher.
Other reasons for why you could be searching for secured credits cards to build credit could be due to repossessions, foreclosures, divorce, illness or bankruptcy. No matter your current situation, there are options available to help you rebuild.
Why Does Secured Credit Cards Require A Deposit?
Yes, secured credit cards do require a deposit of your own money. You are basically paying a company to report your history to the bureaus using their card. Many companies required a security deposit minimum of $500.
However, we have found 2 companies that have great reputations and offer secured credit cards with low deposit fees. These two companies are OpenSky and Applied Bank.
What Is The Minimum?
Having a secured card is an excellent way to rebuild a damaged credit history. It requires a refundable security deposit that is equal to the credit limit determined by the amount you deposit.
For example, if you deposit $200 you will have a $200 credit limit. The refundable deposit is very important as it allows you to open an account without a deposit.
When you apply for secured credit card, the banks will request the collateral "your cash" to secure your limit. This is why it is called, secured. With these cards, there’s less risk for the banks since they have collateral "your security deposit". This makes the card easier to get, and often with lower interest rates than traditional credit cards.
What are Secured Credit Card Banks?
Opensky and Applied Bank are banks that cater to people looking for secured cards outside their traditional local banks. Each bank has their benefits and both report to all credit bureaus (Equifax, Transunion and Experian).
They allow customers to safely deposit their money on credit cards in exchange for reporting to the banks. Both banks are FDIC insured.
Established in 1999, does not pull your credit during the application process - so there is no inquiry on your credit report. Also, you get to set your credit limit. It can be as low as $200 or high as $3,000. You can use your card for everyday purchases like gas, groceries or recurring bills such as utilities.
Just make your minimum required payment monthly on time and see your score improve. Your deposit is refundable as it is your own money. 99% of our OpenSky customers who started without a credit score earned score with the credit bureaus in as little as 6 months. Lowest annual fee of $35.
Applied Bank has been issuing credit cards since 1996 to help people rebuild their score regardless of their past history. There is no credit check to apply and the process only takes 5 minutes.
You choose your deposit from $200 or $5000. The best thing about Applied Bank is that the APR stays the same at 9.99%. Even if your late it will stay the same. Reports to all three credit agencies and you can see your score improve within a couple of months. Annual fee of $48.
Tips To Apply For A Secured Credit Card
With no credit checks, finding the right card should be easier. However, here are some tips to finding which one works best for you.
- Compare options, do not bite of the first offer you see. Compare minimum deposits, APR and associated fees.
- Include All Income. You want your debt to income ration reported accurately. This means when applying to put child support, part-time, full-time, social security, alimony, retirement or any side hustles. You can even use your spouses income as household income.
- Paying on time can over time can increase your score. This will allow you to start considering applying for unsecured credit cards. Monitor your score closely and choose future options wisely to never repeat this cycle again.
The Main Benefits
The main benefits are high approval odds (even with no, limited or bad credit), low fees, and monthly reporting to the three major credit bureaus. Some secured credit cards also offer rewards.
And like all traditional cards, secured cards give users a $0 fraud liability guarantee for unauthorized transactions.
What Score Is Needed To Apply?
There are no score requirements to apply as there is no credit check needed. Many customers who have scores as low as 300 have gotten secured credit cards for rebuild credit. Remember, you are using your own money as the credit limit. The higher the deposit, the higher your credit limit.
Understanding the Difference Between Scores and Reports
You hear it everywhere you go and mostly on television about credit scores. However, most people have trouble establishing the difference between scores and reports. A credit score is simply a number assigned to represent your history of payment.
Many banks used credit scores to decide if you are highly likely or less likely to repay a loan. If your score is higher, you are rewarded with lower interest rates and more flexibility. If lower, you receive higher interest and less flexibility.
You have more than one credit score. The three main bureaus will each show you a different score each time you check them. This is because Equifax, Transunion and Experian analyze with their own methods.
Because credit scores are based on credit history reports, it is very important to know what's on your report also. To better aid yourself in repairing, looking at your report is easier.
Credit reports are statements that show your the beginning date of credit established until the present. They include information about your creditworthiness, standing, reputation and standards of living. Not all reports show the same data.
For example, many creditors have made Transunion a priority of Equifax lately. This is due to the many breaches that have happened lately. However, when you receive your secured card all bureaus will receive your information.
The best secured credit card to build credit with is the one with a lower interest rate and deposit. Your objective should be to build credit inexpensively. Fortunately, we have listed the best two available on the market today.