Key points:
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An unsecured credit card may help boost your credit score if you practice good credit management habits.
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If you believe your credit score may make it hard to qualify for an unsecured credit card, a secured card may be an option.
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Using your secured credit card responsibly may allow you to graduate to an unsecured card.
Can an unsecured credit card improve your credit?
Any credit card—secured or unsecured—could help improve your credit score as long as you use it responsibly.
If you use an unsecured credit card responsibly by practicing good credit management habits, it may help boost your credit score.
But what are good credit habits? A few practices can help you boost your credit score using an unsecured or secured card.
How to build credit with an unsecured credit card
An unsecured credit card can help you build credit history in many different ways. Your card use could affect several different scoring factors. Here are two of the most important steps you can take to impact your score:
When you make on-time payments on your unsecured credit card, you add positive payment history to your credit report, according to Consumer.gov. Payment history is important because it’s one of the factors lenders (like credit card companies) look at before deciding to loan you money.
Pay your monthly balance in full
Your statement balance is the amount you owe at the end of your billing cycle. If you wanted to repay your account in full, you would pay your statement balance. Paying your account in full is important for your credit utilization.
Your credit utilization (or your credit usage) is the amount of debt you owe on your credit cards compared to your credit limit across all cards. How much of your credit you use is such a big deal because credit utilization makes up 30% of your FICO® Score.1 When you pay your statement balance in full (instead of just making your minimum payment) you can lower your credit utilization. This may boost your credit score.
When you pay your statement balance in full and on time, not only do you lower your credit usage, you can also avoid incurring interest charges on your purchases.
What’s the difference between a secured card and an unsecured card?
The difference between a secured and unsecured credit card comes down to the way issuers determine credit limits. For an unsecured card, your credit limit depends on your credit profile, including your credit history and income. While your credit history may still influence your credit limit for a secured card, you typically have to provide a deposit upon account opening that determines your credit limit.
Are secured or unsecured cards better for your credit?
While secured credit cards can be a great option for building or rebuilding credit, they aren’t better or worse for your credit than unsecured cards. Your overall credit history and the way you use your card determine the impact on your credit score. An unsecured card, like a secured card, may help you build credit with responsible use.
Can I still improve my credit if I don’t qualify for an unsecured card?
If you don’t qualify for an unsecured card because you have no credit or believe that you have a bad credit score, getting a secured card may be an option.
A secured card is backed by the cash you deposit at account opening. Your security deposit is usually refundable depending on the terms set by your credit card company. Other than that, a secured card works just like a regular, unsecured card. Typically, your credit card company reports any activity on your secured card to a credit bureau (or all three: Equifax®, Experian®, and TransUnion®). Plus, using your secured credit card responsibly may allow you to graduate to an unsecured card.
Did you know?
With a Discover it® Secured Card, you can get your deposit back when you upgrade to an unsecured card after six consecutive on-time payments and six months of good status on all your credit accounts.2 Your account number, benefits and rewards stay the same.
How can I qualify for an unsecured credit card?
An unsecured credit card isn’t backed by collateral (unlike a secured card, which usually requires a security deposit). Because unsecured cards aren’t connected to a deposit, they usually require higher income levels and credit scores than secured cards.
Lenders use your credit score to help determine if you can handle credit and make payments responsibly on an unsecured card and what your credit limit will be. So, someone with a higher credit score may have more unsecured card options than someone who only has fair credit or poor credit.
What credit score is needed for an unsecured card?
The exact credit score requirements for an unsecured card vary by credit card issuer. But you can still apply for a secured credit card if you get turned down for an unsecured card. From there, you can work on building credit history until you qualify for an unsecured card.
What you need to apply for an unsecured credit card if you have bad or poor credit
Before applying for any credit card, you should compare different credit card offers. There are many different credit cards out there with different offers, fees, and rewards programs. It’s a good idea to look at your spending habits to see what categories you spend the most in, and then shop for a card that best fits your needs.
You may want to review your credit report and have an idea of your credit score so you know what kinds of cards you may qualify for.
How long does approval take if you have poor credit?
Sometimes credit card decisions are instant, but your credit card issuer may take a longer time to decide. If you’re applying for a secured card, you’ll also need to provide your deposit. You should also keep in mind that it may take a few days (or weeks) for you to receive your new credit card in the mail.
If your credit card application is rejected, you’ll usually receive a letter in the mail telling you why. If you’re rejected for an unsecured card, you can take the necessary steps for building credit history before applying again.
