Getting a secured credit card can be a wonderful option to help build your credit. By setting up a secured credit card account, you use a small refundable cash deposit — the minimum amount can very by issuer — to build your credit and create a stronger foundation for your financial future.

You will use your secured card — which has a total credit limit equal to the amount of your refundable deposit — until you get approved to “graduate” to an unsecured credit card. In this case, “graduating” means that you keep your card, but get your security deposit returned so that your credit card becomes an unsecured card with credit line.

Your payment history on the secured card is reported to the three major credit bureaus, helping to establish your credit history.

You may be wondering what it takes to graduate from your secured credit card. Are there any important things that you should try to do to build your credit faster, or any mistakes to avoid?

What Graduation Requires

Secured credit card graduation is a bit like graduating from high school or college: You need to follow a few key guidelines, be evaluated on how well you perform on a few important criteria and hopefully prove over time that you can be trusted with more responsibility. Credit card issuers will look at your secured card usage for a period of time to determine if you’re spending responsibly over time.

How long will it take before you can graduate to an unsecured credit card? It could be a few months to a couple years, depending on a few factors, including where your credit score was when you got the secured card and the policies of that specific credit card issuer. Some secured cards do not offer the option of graduating to an unsecured card, so make sure to check with your issuer before filling out the application.

Please keep in mind: Following the tips below is not a guarantee that you will graduate to an unsecured credit card within a certain amount of time. Every individual’s financial situation is different and this is not an all-inclusive list of possibilities and circumstances. But, following these guidelines may help you avoid the mistakes that can cause some people to fall short of their credit-building goals.

Here are four key guidelines that are considered by your card issuer when deciding whether you qualify to graduate from a secured credit card to a regular unsecured card.

1. Improve Your FICO® Score

Your FICO® Score is one of the biggest factors that credit card issuers look at when deciding whether you’re ready to graduate from your secured credit card. Hopefully, during the months during which you have used your secured credit card, you are making positive improvements in your FICO® Score.

Your FICO® Score (which ranges generally from 300 to 850) is determined by evaluating five categories, weighted in the following percentages:

  • Payment History, 35 percent: How long a track record you have of paying your past credit accounts on time
  • Amounts Owed, 30 percent: How much total debt you owe, and if it is a manageable level
  • Length of Credit History, 15 percent: How long you have been borrowing money and managing it responsibly
  • Credit Mix, 10 percent: What different types of debt you have, such as a mortgage, installment or car loans, retail accounts, and credit cards
  • New Credit, 10 percent: How recently you have applied for new loans or credit cards

If you are building credit for the first time, you probably do not have a lengthy credit history or much of a credit mix, so this means that the other factors — like your payment history — are even more important to help build your FICO® Score.

Since your payment history carries the most weight in calculating your FICO® Score, being late with credit payments can be a big problem. Paying your bills on time during every month that you have your secured credit card, and managing your secured credit card account responsibly, will help improve your likelihood of increasing your FICO® Score and qualifying to graduate to your next credit card.

2. Stay Within Your Deposit Limit

One of the most important factors in managing your secured credit card account responsibly is making sure that you don’t exceed your deposit limit by missing payments or incurring extra interest and fees.

For example, say that your deposit on your secured card is $500. You charge $500 and then miss a payment or don’t make the minimum payment. Let’s say your late fee was $25 and your interest was $10… you now owe $535, which is over your $500 limit. If you’re owe more than your security deposit, then you can’t graduate to an unsecured card. You are now over the limit of your card, and if you owe more than your deposit, you can’t graduate to an unsecured card.

3. Manage Other Financial Accounts Responsibly

Along with paying bills on time for your secured credit card account, you also need to manage the rest of your financial life responsibly. If you have any other credit card accounts, debts, loans, or monthly bills, make sure to pay those bills on time. To get approved to graduate to an unsecured credit card, your overall financial life needs to be in good order — not only that specific secured credit card account.

For example, say that you have a Discover it® Secured card and a credit card from a different bank or issuer. If you consistently make the required payments on time, on your Discover secured card, but miss a payment on your credit card with the other issuer, this means that even if you’re in good standing with Discover, you still have a problem with having missed that payment on the other card. Not being in good standing with another issuer may mean that you won’t be approved to graduate to an unsecured card.

Discover looks at the bigger picture of your entire financial history across all of your accounts when deciding whether you are ready to graduate from your unsecured card — not just your history of paying your Discover bills.

4. Make (At Least) the Minimum Payment Every Month

Sometimes, when money is tight, people feel that they can afford to skip a payment on a credit card. That’s not a good idea. Missing a payment (especially if you fall behind by 30 or more days) can cause lenders to classify you as a higher risk to fail to repay your debts. This can cause big damage to your FICO® Score.

To avoid falling behind on your credit-building goals, make sure that you are paying at least the minimum payment on each of your credit accounts every month. Even if you cannot currently afford to pay more than that, just paying the minimum — on time — will help you build credit by establishing a positive payment history, and should help you avoid the most damaging hits to your credit report.

Before You Order That Cap and Gown

Remember: Following the advice in this article is not a definitive guarantee that you will graduate from your secured credit card in a certain amount of time. Every secured cardholder is evaluated based on their unique financial situation and credit history.

However, if you follow these simple guidelines — by paying your secured card on time, staying within the deposit limit, and regularly making at least the minimum payments on time on any credit accounts that you have — you may be able to maximize your chances of graduating to an unsecured credit card. Plus, in the meantime, you’ll be establishing the sound financial habits that will serve you well in the future.

Legal Disclaimer: This site is for educational purposes and is not a substitute for professional advice. The material on this site is not intended to provide legal, investment, or financial advice and does not indicate the availability of any Discover product or service. It does not guarantee that Discover offers or endorses a product or service. For specific advice about your unique circumstances, you may wish to consult a qualified professional.

Your FICO® Credit Score and key factors are based on data from TransUnion and may be different from other credit scores. This information is intended for and only provided to Primary cardmembers who have an available score. See Discover.com/FICO about the availability of your score. Your score and key factors are available on Discover.com and your score is provided on statements. You will see up to a year of recent scores online starting when you become a cardmember. Discover and other lenders may use different inputs, such as a FICO® Credit Score, other credit scores and more information in credit decisions. This benefit may change or end in the future. FICO is a registered trademark of the Fair Isaac Corporation of the United States and other countries.

Discover Financial Services and Fair Isaac are not credit repair organizations as defined under federal or state law, including the Credit Repair Organizations Act. Discover Financial Services and Fair Isaac do not provide "credit repair" services or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating.