What should you do if you want to get a credit card to improve your credit, but you don’t have good enough credit to qualify for a credit card?
Get a secured credit card.
Unsecured Credit Cards vs. Secured Credit Cards
Many people don’t realize there are two types of credit cards.
- Secured Cards
- Unsecured Cards
Unsecured cards are credit lines extending to you without a deposit. These are more high-risk investments for the credit company because they must fight you for the money if you don’t pay your bill.
Secured cards are issued once you pay a deposit, usually equal to the credit line. So, for example, to obtain a $300 credit line card, you must pay a $300 deposit. This way, the credit company does not lose much money if you don’t pay the bill.

Secured cards act very much like unsecured cards. They are issued by Mastercard, Visa, etc., and you can use them just like an unsecured card. They also usually have interest accruing if you do not pay off the entire balance each month.
And both cards report to the credit bureaus, so there is no difference in how they affect your credit score.
What if you’re in between?
There are unsecured credit card companies that cater to people with bad credit. Well, they can do that by charging outrageous fees. So if you have bad credit, read over the terms carefully before you decide.
You may save much more money by choosing a secured card over an unsecured card because of those fees.
Secured Credit Cards Vs. Prepaid Debit
People assume there is not much difference between secured credit cards and prepaid debit cards like Green Dot.
That is false.
First, the money you spend on a prepaid debit card is your own money. With an unsecured credit card, your deposit sits in an account. Second, suppose you pay diligently for a reasonable length of time and raise your credit score. In that case, you can close the secured card, open an unsecured card, and get your deposit back!
Second, prepaid debit cards tend to run higher fees than secured cards.
Third and most important, prepaid debit cards do not report your payment history to the credit bureaus. Simply put, prepaid debit cards do not improve your credit.
How to Use a Credit Card to Improve Your Credit
It is simple to drastically improve your credit in a relatively short amount of time with credit cards, whether they are secured or unsecured. It may not be easy, though. Financial fortitude is a must.
- When your balance is reported to the credit bureau each month, it must be less than ⅓ of your limit. And you need to have a balance! This may sound improbable, but there are a few ways to do this.
- You could put any subscriptions you have on the card like Netflix, Hulu, etc. Then use it for nothing else.
- You could put a bill on autopay that is within the limits of the card. Then use it for nothing else.
- You could make more than 1 payment each month. Your monthly statement may tell you about which day they report to the credit bureaus. If not, customer service should be able to tell you.
- Pay off the balance when it is due.
Looking to learn more about the basics of good money management? Join my Facebook Group of like-minded moms!
Interested in other ways to improve your credit or why credit is vital for FIRE? Leave me a comment below!