Could These Credit Cards Help You Fix Your Low Credit Score?

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If you have poor credit, a secured card could be the ticket to help you improve it. Read on to find out why. 

If you don’t have good credit, it’s going to be hard to get approved to borrow money. In fact, Chase Bank indicates that if you want to be approved for just about any credit card out there, you’d need a credit score of around 700. Since credit scores go all the way down to 300, individuals with bad credit are a long way away from having their choice of cards.

The good news is, if you have bad credit, you aren’t stuck with it forever. There are ways to improve your score — including, in many situations, applying for a specific type of credit card.

Could these credit cards be the ticket to improving your score?

If you want to improve your credit score, there’s a difficult problem you have to deal with. Improving your score requires you to show you are a responsible borrower. You need to demonstrate:

You can pay your bills on time, as payment history is the most important determining factor in your credit score.You can use your credit responsibly, which usually means keeping your credit utilization ratio below 30% (not using more than 30% of credit available to you).You need a good mix of loan types so you can demonstrate you’re able to repay different kinds of loans responsibly.

In order to prove these things, you need to actually be able to borrow, though. And that’s where the big problem comes in. If you have bad credit, most lenders aren’t going to let you borrow. So, you can’t prove yourself.

There’s one exception, though: You can get a secured credit card. Just about anyone can be approved for a secured card because of the way they work. With a secured card, you make a deposit equal to the line of credit you’re given. So, if you want a secured card with a $500 limit, you’d deposit $500 into a special account.

You get to use the credit card like normal, charging things on it, paying it each month, and then charging on it again. But that deposit sits there waiting in case you stop making payments, in which case the lender can take it. Since you can’t borrow more than the deposited amount, there’s essentially zero risk to the lender, which is why even people who just recently came out of bankruptcy can get a secured card.

Once you get a secured card, you can then do all those things mentioned above to improve your credit, like pay your bill on schedule and use only a small amount of credit available. You’ll start to develop the payment history you need to do other kinds of borrowing to get a good mix of different kinds of credit. And your credit score will go up over time.

What to look for in a good secured credit card

If you want a secured card to help you build credit, be sure to find one that reports to each of the three major credit bureaus: Equifax, Experian, and TransUnion. Otherwise, the card won’t have the desired credit-building effect.

You should also look for a secured card with no fee, as there are options out there you don’t have to pay for. Don’t worry too much about card rewards right now, even though that’s a nice perk that some secured cards offer. The goal is to improve credit, not rack up rewards. And, if you plan to pay off your balance in full each month, the APR doesn’t really matter either.

Once you get your card, you can start doing all those things already mentioned by setting up autopay and keeping track of how much you charge — and you should start seeing your credit improve so you can begin reaping the benefits that come with a better score.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.

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