Getting a secured credit card can be a valuable 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 vary 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 a credit line.

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

So, what does it take to graduate from your secured credit card?

  1. Understand Graduation Requirements
  2. Stay on top of your FICO® Score
  3. Stay Within Your Deposit Limit
  4. Manage Other Financial Accounts Responsibly
  5. Make (At Least) the Minimum Payment Every Month

1. 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.

2. Stay on Top of 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 to your credit.

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.
  • Length of Credit History, 15 percent: How long you have been borrowing money.
  • 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 keep your FICO® Score under control and qualifying to graduate to your next credit card.

3. 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 owe more than your security deposit, then you can’t graduate to an unsecured card.

4. 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.

5. 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.

But, 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.

Published April 24, 2019.

Updated March 18, 2020.

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