If your credit score has taken a hit these past few months due to late payments, high balances, or something else, then it might be time to look into the best ways to rebuild your credit. There are a number of ways to do just that, and the best option is through using a secured credit card. There are even options that won’t do a credit check, which can be helpful since just the simple act of having a credit pull can ding your score. So, without further ado, here are the best credit cards for rebuilding your credit score in May 2020.
What is a secured credit card?
A term we’re about to use quite often is secured credit card, and you might not know exactly what that is. Essentially, credit cards come in two forms: secured and unsecured. Unsecured is the most popular, and that’s where the issuing company gives you a line of credit with nothing backing it but your credit score and income. Should you default on the payment, the credit company will have to send your bill to collections and dock your credit score, just hoping they get the money back (though it’s never good to put an issuer in this position). However, with a secured credit card, you’re putting the money up before they give it to you. So, for instance, if you put $1,000 up for a secured credit card, you’re giving the credit issuer that money and they’re giving you that limit. Each month you’ll make payments for what you spent, or what you can cover, and treat it like it’s a normal credit card. However, they’ll keep your $1,000 until you close out the account, in which case they’ll send a check with your money back to you.
If you have a lower credit score or no credit score, this is one of the best ways to build your credit. While it’s a little annoying to have to give them the initial balance and then make payments each month on what you spend, seemingly spending money twice, it really does work fantastically. After you make on-time payments for several months with a secured credit card, you should be able to easily obtain an unsecured card, close out the secured card, and get your money back.
Annual fee: $0
Recommended credit score: Bad to good
Cash back percentage: 1%-2%
Discover’s it Secured card is one of the best options out there for rebuilding your credit, as long as you’re okay with getting a credit check pulled. You’ll have to use it like a secured card, which we described above, but Discover does things a bit differently. Instead of having to one a new card after using this one, Discover has an automatic monthly review that is quite nice.
After you have the card for 8-months, and as long as you keep on top of payments and use the card responsibly, Discover will automatically start reviewing your account monthly to see if you’re ready to graduate to an unsecured card. If they deem that you’re ready to transition, then Discover will automatically give you back the initial deposit you used to secure the card and move you to an unsecured version of it.
Discover offers 2% cash back in certain categories with 1% on every other purchase, so not only are you getting a secured card, but you’ll be earning money on every purchase. Discover also matches every dollar that you earn in cash back and gives it to you at the end of the year, so if you earn $100 over the course of the year, Discover will give you an additional $100 at the end of your first year. If you’re wanting the ultimate secured credit card, the Discover it Secured really is the best option.
Annual fee: $35
Recommended credit score: Bad to good
Cash back percentage: 0%
Now, if you’re not a Discover fan, or if you need a Visa because the places are you don’t accept Discover, then the OpenSky Secured Visa is a great option. OpenSky performs no credit check when you open the card, which can be very nice since there’s no impact on your credit score at all. However, OpenSky charges a $35 per year annual fee, which is something that the above Discover forgoes. OpenSky also doesn’t offer any cash back, so do keep that in mind.
Really, OpenSky is for those who need a card with lower balances (as low as $200) or something without a credit check. If you can go for the Discover listed above, is really is the best widely-available option around]
Check with your local credit union or bank
Another option is to check where you bank. Often times, local credit unions or banks will have their own version of a secured card, though cash back, annual fees, and APRs will vary depending on where you’re located and who you bank with. However, it can be much easier sometimes to get these types of cards, given that your bank already sees what your balances are and what type of cash flow you have.
Looking for something else?
Now that you’ve found the best credit card to rebuild your credit, we’ve got several other posts that you should really check out. If you have a student at home, you’ll absolutely want to check out the best cards to get them. Also, be sure to read through our credit card FAQ. We also lined up how to best utilize your cashback card, so be sure to take a look at that too. Also, why not take a look at some cards to make a choice as to which you should sign up for. We’ve got a roundup of the best cards in every category, as well as some of our favorite 0% interest cards. Plus, we recently outlined the best cashback cards, if that’s something you’re into. For our comprehensive list of the best credit card deals around, check out our guide, which can be found here.
We’ve also previously went over the best Amazon cashback cards to grab if you love shopping at the online retailer. However, if you prefer Target, we’ve also got a guide that helps you earn the most with purchases there, too.
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