Does a Secured Card Show As Secured on Your Credit?

Secured credit cards --- a normal credit card account backed by a security deposit --- might be your only choice to build credit after a bankruptcy, or to start building credit for the first time. These function like a credit card, so there should be no indication on a credit report of the security deposit. However, it never hurts to be sure.

Identification

Although secured cards are less risky than a regular, unsecured credit card, they still show up on a credit report as a normal credit card. The issuer of a secured account usually puts the security deposit in a separate bank account and lets the borrower make purchases with a line of credit. Should the borrower ever default on the account, only then does the creditor draw on the security deposit.

Considerations

Not all issuers of secured cards report to all three major credit bureaus, especially not secured accounts with small, local lenders, according to the BCS Alliance. The large national banks almost always report to Equifax, Experian and TransUnion. This is why borrowers looking for a secured account should question the lender about which bureaus will pick up the account.

Secured Charge Cards

Very similar to credit cards and often confused with one another are charge cards. Charge cards have no preset limit; it's only what the lender thinks the borrower can pay. A secured charge card shows up as an open account, instead of a revolving account like a regular credit card. This does not necessarily offer fewer benefits to a credit score. However, it is better to have a credit card if you tend to carry no or low balances, because using a small percent of your credit limit boosts credit utilization, an important part of the FICO score. Charge cards do count towards credit utilization.

Tip

Overall, the BCS Alliance suggests applying for a secured account with a top-10 credit card issuer. Not only do these usually report to the bureaus, but also they are far more likely to charge a reasonable annual fee. Credit repair companies often charge huge fees by claiming they can guarantee an account to help rebuild your credit --- no legitimate creditor guarantees approval for anything. Some might use deceptive tactics to gather fees, such as requiring the borrower to call a pay-by-the-minute number.