Key Takeaways
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A secured credit card can help those who want to build or rebuild their credit history.
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When you open a secured credit card, you need to send the credit card company a refundable security deposit. In general, your deposit will determine your card’s credit limit.
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The Discover it® Secured credit card has benefits and features that make it great option for those working on their credit.
A Discover it® Secured credit card can help you build credit with responsible use.1 It’s among the secured cards that have no annual fee, offers rewards, and allows to upgrade to an unsecured card after six consecutive on-time payments and six months of good status on all your credit accounts.2 Learn more about how secured cards can help you build a credit history1 and what makes the Discover it® Secured credit card special.
What is a secured credit card?
A secured credit card is a type of card that’s created for people who want to build or rebuild their credit history. The card works similarly to a traditional unsecured card in many ways. You can use the card to make purchases online and in stores, pay off your balance over time, and with some cards earn rewards.
When you open a secured credit card, you need to send the credit card company a refundable security deposit. In general, your deposit will determine your card’s credit limit.
For a Discover it® Secured credit card your credit line will equal your deposit amount, starting at $200 up to $2,500.3
This arrangement limits the card issuer’s risk because if a cardholder stops making payments the card issuer can keep the deposit to satisfy the outstanding balance. The deposit is why it’s typically easier to get approved for a secured card than an unsecured card.
How to build your credit history1 with a Discover Secured credit card
Once you are approved for a Discover it® Secured credit card, Discover will report your account to all three major credit bureaus. Your credit scores are based on your credit report from one of these bureaus.
You can follow a few simple steps to use your new card to build your credit history:
- Use the card. You may want to regularly use your card to show that you can responsibly manage a credit account. At a minimum, you could set up your card to pay for a small monthly bill.
- Pay your bills on time. Your payment history can be one of the most important credit scoring categories. Making at least your minimum payment by the bill’s due date each month could benefit your credit and help you avoid late payment fees. Additionally, you can avoid paying interest on purchases if you pay your bill in full and on time every month.
- Don’t use a large portion of your credit limit. Credit scores compare your credit card’s balance and credit limit to determine your credit utilization ratio. A low utilization rate is best for your scores.
- Pay down balances early. Credit card issuers often report your card’s balance and limit around the end of your billing cycle (a few weeks before your bill is due). As a result, you could have a high utilization rate even if you pay your bill in full. If you’re using your card frequently or for large purchases (or to earn rewards), you could pay down the balance before the end of your billing cycle to decrease the reported balance.
As with other types of credit accounts, a secured credit card could also wind up hurting your credit. If you miss a payment, the late payment mark could stay on your credit reports for up to seven years. Maxing out your card can also hurt your credit and make it more difficult to manage your payments. However, paying down the balance might quickly help because many credit scores only consider your most recently reported credit card balance and limit.
How to rebuild credit with a secured credit card
The main difference between building and rebuilding your credit history is the starting point. When you’re building credit history for the first time, you’re starting from zero. When you’re rebuilding, you’ve had credit history but have negative marks that are hurting your scores.
Rebuilding credit history might be a little more difficult, because negative marks can impact your scores as long as they’re on your credit reports. And most don’t fall off until seven years later.
But the same steps can help you build or rebuild credit history: opening new credit accounts, making payments on time, and having a low utilization ratio.
If you’re rebuilding your credit history, you may also want to review your credit reports for errors and dispute any inaccurate, negative marks. Paying off collection accounts may also help, but it depends on your credit score and many other variables.
Benefits of a Discover Secured credit card
Many credit card issuers offer secured credit cards, and where you get a credit card doesn’t impact your credit score.
Did you know?
The Discover it® Secured credit card has benefits and features that could make it a better option than some others.
Secured credit cards often come with an annual fee — some may even have a monthly fee. But the Discover Secured credit card has no annual fee. It also has no late fee on your first late payment.4 See rates, rewards, fees, and other cost information for the Discover Secured credit card.
The Discover it® Secured card is also one of the few secured cards that offers cash back rewards. Using the card, you can earn 2% Cashback Bonus® at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter, automatically. Plus, earn unlimited 1% cash back on all other purchases.5
The card is also part of Discover’s Cashback Match, where we’ll automatically match all the cash back you’ve earned at the end of your first year.6
Reports to all three credit bureaus
Discover will report your account and activity to all three major credit bureaus. Some secured cards only report to one or two of the bureaus.
Could be upgraded to an unsecured credit card
Often, you’ll need to close your secured credit card to get back your security deposit. However, 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 card could be upgraded to a standard, unsecured credit card, helping you continue to build your credit history1 without having to close and open accounts.
What is the best Discover card to build or rebuild credit history?
The Discover Secured credit card may be the best option if you’re focused on building or rebuilding your credit history. However, students who are building their credit could also look into the unsecured Discover student credit cards.
If you’ve never had a credit card but you’ve had other types of credit, such as a student loan or auto loan, you could also see if you qualify for an unsecured credit card. The Discover pre-approval online tool lets you check if you’re pre-approved with no harm to your credit score.7
What if I’m not approved for a Discover Secured credit card?
Getting denied a credit card can be frustrating, but there are still options for building or rebuilding your credit history.
Look over your credit reports for errors and dispute inaccurate information you find. All three credit bureaus have online portals you can use to file a dispute. You can also dispute directly with your creditor, and in general they need to respond within 30 days. Correcting inaccurate negative marks could quickly improve your credit score.
Apply for a store credit card
Sometimes, retail or store credit cards have less stringent requirements. You could try to build or rebuild your credit history with one of these cards instead of a secured card.
Become an authorized user on someone else’s credit card
When someone adds you as an authorized user on one of their credit card accounts, the credit card issuer may report the account to the credit bureaus under your name. Depending on how the primary cardholder manages their account, it could help (or hurt) your credit.
If you have a close family member or friend who’s responsible with credit, you could ask them to make you an authorized user. But check with the credit card company’s policies first — some don’t report authorized user accounts.
Whether you’re just starting your credit journey, or you need to recover from some mistakes, a Discover it® Secured credit card can help you build credit with responsible use.1 Paying your bill on time and keeping your balances low with a secured credit card is a great place to start.
