Many credit card issuers offer secured cards to help individuals build their credit scores. With these cards, consumers may spend up to the credit limit equivalent of their security deposit amount; once established payments have been met successfully, some lenders may upgrade your secured card into an unsecured one.
1. Ask Your Issuer
Secured credit cards can help those seeking to establish or rebuild their credit histories by showing they can manage debt responsibly. By paying on time and avoiding large purchases, a secured card can show lenders you’re trustworthy borrower – potentially ready for an unsecured card when ready. However, as each issuer differs in how they offer this transition process for switching over, be sure to ask what options might be available to you before making this transition.
Some credit card issuers offer programs to “graduate” you to an unsecured card by returning your security deposit after a certain period or conducting regular account reviews and determining if it meets criteria to make this transition. Other cards have more rigorous processes which require you to submit an upgrade request yourself; it’s always wise to consult your card issuer about what options exist when the time comes for making this change.
Converting your secured credit card to an unsecured one may also be possible by accepting a higher credit limit from its original issuer, and this should generally only become possible after several payments have been made on time and with no missed payments or hard inquiries occurring that could cause irreparable harm to your score. Taking this route may save time and energy when opening new cards as it would result in hard inquiries that can have adverse effects lasting up to 12 months on your scores.
If your card issuer does not offer upgrade options or meets none of your financial goals, closing out and applying for an unsecured card with another provider might be the way forward. When doing this, shop around for one with the lowest interest rate and fees related to meeting them.
2. Get a Better Card
Once you’ve made on-time payments for at least 12 months and met the card issuer’s criteria (typically starting around 580), it may be possible to upgrade from secured to unsecured cards – particularly cards intended for fair to good credit users who offer cash back incentives as this will further build your score with responsible use.
Contact your card issuer and inquire about moving you onto an unsecured card. Alternatively, apply for one with another issuer – however this requires reapplying and will produce another hard inquiry on your credit report, possibly lowering it temporarily.
Secured credit cards are intended for those with limited or no credit history who need to establish themselves as reliable borrowers. They typically have lower minimum credit score requirements to qualify and require an initial cash deposit that becomes the credit limit once payments begin being made; additionally, secured cards typically feature smaller limits than their unsecured counterparts.
As soon as you demonstrate responsible credit card use, many card issuers will upgrade you to an unsecured card and return any security deposits if no longer need the card. Some issuers do this automatically while others require you to request it.
Applying for a card that provides better benefits such as travel rewards, cash back or airline miles, Global Entry/TSA PreCheck credit or entertainment perks can also be key in finding an ideal card that helps meet your spending habits and financial goals.
After making the switch from secured to unsecured cards, whether or not your credit score increases depends heavily on how you handle them. To ensure continued improvement of your score, pay down balances quickly while staying below credit utilization ratio and making on-time payments.
3. Close Your Account
Many card issuers offer the ability to upgrade from a secured credit card to an unsecured one and return your security deposit when this transition takes place. It’s an effective way of building credit and reaping all its benefits while potentially eliminating annual fees as well.
Graduating from a secured card to an unsecured one marks an important financial step forward, showing your ability to use credit responsibly and that you’re ready for the next phase in your credit journey. While it may take time to build enough credit score to qualify for an unsecured card, consistent responsible usage and on-time payments can speed up this process significantly.
Befor cancelling your secured credit card, be sure to clear away any outstanding balances and contact the customer service number on its back. An agent should be able to assist in closing your account quickly; ask how soon your security deposit will be back as well.
Closing an account can reduce your credit score as it reduces the available credit you have available and subsequently affects your utilization ratio. While closing accounts can have some detrimental effects on your score, it is still vitally important that responsible card use and timely payments help strengthen it over time.
Be sure to cut up and throw away your old card so no one attempts to claim back your deposit by accidently using it or trying to reopen it. Closing accounts also increases your odds of approval when applying for mortgage or car loans – the more preparation you put in now, the greater your chance is of receiving an attractive rate on them! Good luck!
4. Get a New Card
Secured credit cards can help build or rebuild your credit score. By responsibly using credit over time, unsecured cards may offer transition opportunities; many secured card issuers offer this feature after six to twelve months of responsible use; this usually results in your security deposit being returned and conversion to an unsecured account.
Or you could apply for another credit card with similar features to your secured one; just remember that doing so will probably result in a credit check that may temporarily lower your score. Therefore, only apply for such cards if you know you can responsibly manage and repay what is owed on time.
Finding out whether or not it’s possible for you to move from your secured card to an unsecured one is best done through speaking directly with the provider who issued it, who may offer you one directly – this is often easier as you won’t need to cancel and reapply, potentially leading to temporary dips in your credit score.
When applying for an unsecured credit card, be sure to set up automatic payments and credit utilization alerts so you can build responsibly. This will allow you to maintain any good habits you may have developed while using your secured card without falling back into irresponsible spending patterns.
Those who have shown responsible credit card use may qualify for an unsecured card with higher limits and enhanced benefits like rewards on purchases, global entry or TSA PreCheck credit or cash back. It’s essential that once eligible, they research all available cards carefully to find one best suited to their individual needs.