Introduction

At O1ne Mortgage, we prioritize your financial education and well-being. Understanding how to build and manage your credit is crucial for achieving your financial goals. In this article, we will explore the concept of secured credit cards, how they can help you build credit, and the best practices for managing them effectively.

How Long Does It Take to Build Credit with a Secured Card?

Secured credit cards are an excellent tool for individuals looking to establish or rebuild their credit history. However, the time it takes to build credit with a secured card varies based on several factors:

• Your Current Credit Health: If you are starting from scratch, it may take longer to build a good credit score compared to someone with some positive credit history. Conversely, if you have derogatory marks on your credit reports, it can take even longer to see improvements.
• How You Use the Account: Maintaining a low balance and paying your bill on time every month are key to building a positive credit history. Secured credit cards typically have low credit limits, so it’s important to manage your credit utilization rate effectively.
• Other Credit-Building Efforts: Using a secured credit card is just one way to build credit. Combining it with other credit-building strategies can accelerate the process.

On average, it can take several months to over a year to build your credit score enough to qualify for better credit card options.

Should I Close a Secured Credit Card After Building Credit?

Once you’ve achieved your credit goal, you might consider closing your secured credit card. However, there are a few things to consider before making this decision:

• Loss of Available Credit: Closing the card reduces your available credit, which can negatively impact your credit utilization rate and, consequently, your credit score.
• Impact on Credit History: If the secured card is your oldest account, closing it can shorten your credit history, which is a factor in your credit score.
• Effect on Credit Mix: Having a diverse credit mix can improve your credit score. Closing the secured card may reduce this diversity.

Before closing the card, check with your issuer about upgrade options. Some issuers may allow you to convert your secured card to an unsecured card, which can help you maintain your credit history and available credit.

How to Properly Close a Secured Card

If you decide that closing your secured credit card is the right move, follow these steps to minimize potential negative consequences:

• Open a New Credit Card: If your credit is in good shape, consider opening another credit card to offset the loss of available credit from closing the secured card.
• Pay Off Your Balance: Ensure your balance is zero before closing the account. Stop using the card and wait for pending transactions to clear.
• Cancel Recurring Charges: Update payment methods for any subscriptions or recurring bills linked to the secured card.
• Redeem Rewards: If your secured card offers rewards, redeem them before closing the account to avoid forfeiting their value.
• Contact Your Issuer: Request account closure through your online account, over the phone, or in person. Ensure your issuer has the correct information for your security deposit refund and request written confirmation of the closure.
• Monitor Your Credit Reports: Check your credit reports to ensure the closure is accurately reflected. You can monitor your credit progress with services like Experian’s credit monitoring.

Conclusion

Building and managing your credit with a secured credit card requires careful planning and responsible use. By understanding the factors that influence your credit score and following best practices, you can achieve your financial goals and qualify for better credit options.

At O1ne Mortgage, we are committed to helping you navigate your financial journey. For any mortgage service needs, call us at 213-732-3074. Our team of experts is here to assist you every step of the way.