Most people nowadays have become so much dependent on credit cards that they can not even imagine their financial life without a credit card. But, some people don’t get a credit card because they don’t have a credit score. Now the question that arises is how can you build your credit without having a credit card. Secured Credit Cards are the best option to opt for in such situations. These cards don’t only come with all the credit card benefits, but also help you improve your credit score or build it from scratch. In this article, we will help you understand how secured credit cards can help you establish your credit history:

Secured Credit Card Can Help You Establish Credit

What Are Secured Credit Cards?

Secured Credit Cards are cards that are issued against a fixed deposit at the bank that acts as the issuer. It means that you do not need any source of income or any credit score requirements in order to get approved for a secured credit card. There are some basic age requirements and anyone can get a secured credit card by opening a fixed deposit account in a respective bank. This FD amount is considered collateral by the card issuer so that they can use it in case the cardholder fails to make the bill payment.

For those who find it difficult to get approved for an unsecured credit card due to strict eligibility requirements, getting a secured credit card is one of the best options. This doesn’t only provide you with all the credit facilities, but you can also avail of various rewards & benefits. Moreover, you can also start building your credit profile using a secured credit card easily.

How To Build Your Credit Score Using a Secured Credit Card?

Though Secured Credit Cards are a great option for those who don’t have a credit history or a source of income, these cards can also be helpful for other individuals who already have an average or decent credit score. Let us understand how secured credit cards can be helpful in building your credit:

For People With No Credit Score

People who have never used credit or loans in their past life have no credit score. This becomes a problem when they try to get an unsecured credit card as the card issuers can’t approve any application randomly without understanding the creditworthiness of an individual. Such people can easily get a secured credit card by opening an FD account with as low as Rs. 10,000 in the respective bank. However, the FD requirements can be different for different cards, but some issuers like the Kotak Mahindra Bank also offer secured credit cards against FD of Rs. 10,000 only. You can easily build your credit score from scratch using a secured credit card, provided that you keep all the following points in mind:

– Make your credit card bill payments on time and try to clear the full outstanding balance instead of paying only the minimum due amount.
– Don’t spend the entire credit limit of your card, but try to maintain a credit utilization ratio of 30% or less.
Don’t apply for other credit cards very often. Wait for a few months after every credit card/loan application before applying for your next card.

For People With an Average Credit Score

If you are using a credit card for a long time, you would surely be aware of the fact that having a good credit mix is one of the important things to do in order to maintain a good credit score. Having secured as well as unsecured credit cards can help you achieve this goal. So, even if you are having unsecured credit cards, but you don’t have any secured credit or loans, you can consider getting a secured credit card. It will help you maintain a good credit mix and this further improves your credit score. However, getting secured mortgagee loans along with unsecured credit cards is a better option, but if you don’t need these loans, you can simply get a secured credit card to maintain a good credit mix.

Bottom Line

Now, you might have understood how secured credit cards are not just helpful for beginners, but experienced credit card users can also get a secured card to improve or maintain their credit score. These cards can be considered as the staircase to qualifying for unsecured credit cards. If you keep using your secured card responsibly, there are high chances that you will be offered an unsecured card very soon after building a good credit score. If you have any further doubts regarding secured credit cards and how they can be helpful in your credit journey, you can freely ask us in the comment section below!

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