How to Start an Affordable and Secure Credit Building

Credit Building can be exciting, especially for beginners. You can qualify for loans, credit cards, or even mortgages if you start building one.

But be careful. You might make poor credit choices just like the others along the way.

Thus, choosing the right type of credit builder product is essential in helping you towards your secure credit building journey.

What are the Steps to Build Credit?

Establishing a good credit history before you need it makes life much easier. It may sound scary, but it isn’t that difficult once you start.

In building a good credit score, you must consider these three basic steps:

  1. Pay your bills on time.

The most critical factor in credit building is paying your bills on time. Good payment history means paying your bills every month without fail, and this step dramatically affects your credit score.

  1. Apply for the type of card that suits you

A secured credit card is a good alternative for individuals with a low credit score or no credit history. Most secured cards will return your deposit once you establish a record of responsible use.

These cards will both increase your credit limit and better your credit score. It might seem like a struggle having to pay for a couple of credits, but it’s one way to acquire credit in your name.

  1. Get a Job and Be Consistent

Your employment history gives the lenders an overview of the kind of borrower you are. Having the same job for years and receiving a stable salary makes you an ideal client for credit.

What is Secured Credit?

In general, secured credit means collateral will serve as a substitute to cover your debt. The lender will get the collateral in exchange for the borrowed money you failed to pay back.

The corresponding collateral for each secured loan or credit is as follows:

  • An initial cash deposit (secured credit cards)
  • Home (mortgage loan)
  • Vehicle (car loan)
  • Smaller business loans (personal assets) rather than business assets

Nonpayment for secured loans or credit results in the foreclosure and repossession of those respective properties.

What is Secure Credit Building?

Typically, secure credit building is when one’s credit score is improved by using a secured credit card or secured loan. These credit builder products are a famous alternative for building a good credit score.

How it works and its advantage:

  • It gives the lender the authority to get your security deposit for secured credit cards.
  • Conversion of assets into cash allows the lender to get the payment for secured loans.
  • Interest fees on secured loans are generally lower than on unsecured loans since the lender gets more assurance in getting the money back.
  • The approval for secured credit cards is much easier than for traditional credit cards (unsecured ones).

What is a Secured Credit Card?

A secured credit card is an excellent tool for building a good credit score and rebuilding poor credit history. Its approval is much easier than the traditional credit cards we know.

A security deposit is a requirement for secured credit cards. This deposit serves as the collateral if default on payments occurs. If this happens, the lender gets the deposited amount unless you pay on time or maintain a good credit standing.

Pros of a Secured Credit Card:

  • Mainly for people with poor credit scores and limited credit history.

    Secured credit cards can be a great way to improve and build or rebuild your credit score.

  • Easy approval for clients.   

    Secured credit cards can be a good option instead of a traditional credit card. This type of card favors the credit card issuer since it shifts the credit risk away by paying the security deposit.

  • Usually reported to credit bureaus. 

    Credit bureaus regularly receive your credit report, which includes your account history.

  • Debt-free.

    It may be the best option if you want to live debt-free, have limited or no credit history, and are just starting to build one.

  • A security deposit is utilized if you default. 

    When you default on your payment, lenders will use your security deposit. Except if your defaulted balance exceeds your deposit, it will not direct you to collections.

    Even though the credit card issuer will keep your deposit, you don’t need to be worried about your debt collectors chasing you for your missed payments on the card.

  • You can earn rewards. 

    You may be able to acquire rewards on your purchases with some cards.


  • The amount deposited is the  equivalent credit limit.
  • The deposited amount is refundable in cases when (a) You pay your balance in full
    and (b) Upon closing your account.
  • Secured credit cards provide the same benefits as traditional ones (unsecured cards).

How Secured Credit Card Works

A secured credit card functions identically, just like a traditional credit card. You can swipe it all you want until you reach your credit limit, incur interest fees and even earn rewards.

It only differs in the cash deposit made. The application process is also similar to traditional credit cards, except that secured credit cards are much easier to approve.

How Secured Credit Card Improves Your Credit

A secured credit card helps you improve your credit by regularly making your credit report known to credit bureaus. Thus, making on-time payments and in-full is critical when using a secured credit card.

It indicates how likely you will pay back your borrowed money based on your credit history and past financial transactions, and it also gives lenders an idea of how credit-worthy you are.

Final Thoughts

Before filling out those credit application forms, you must consider your lifestyle, spending habits, needs, preferences, and budget. Responsible usage of credit builder products is the key to secure credit building.

It is the attitude you must possess to have a reliable financing partner. In this way, your ladder towards building a good credit score is much more attainable.

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