Secured Credit Cards

• Secured credit cards are similar to other credit cards, but a secured card has a savings account attached to it that acts as collateral for the credit line. The amount of available credit on a secured credit card is generally determined by the balance of the savings account, and you have the option of depositing additional funds to increase your credit limit.
  
  Because the card issuer has collateral in the event the card holder fails to repay what he owes, secured credit cards are available to individuals whose credit scores prevent them from being approved for unsecured credit cards.
  
  

Credit Scores

• Banks and other lenders provide reports to credit reporting agencies that detail if their customers are making timely payments on their loans and credit cards. An individual's credit score is based on these reports, the total amount she owes, how long she has had credit, the types of credit she has and the number of recent credit applications.
  
  

Credit Reporting on Secured Cards

• The majority of banks that issue secured credit cards make regular reports to at least one major credit reporting agency, and many don't differentiate between secured and unsecured credit cards. Even if a report notes that the card in question is a secured credit card, there is no difference in how the card holder's credit score is calculated.
  
  

Benefit of Positive Credit Reports

• Positive credit reports generated by making regular payments on a secured credit card can gradually improve your overall credit score. These positive reports remain on your credit history for several years, and as older negative reports begin to expire, the more recent reports will have a bigger impact. Timely payments to a secured credit card will lead to additional avenues of credit, and in some cases, the secured card may be converted to an unsecured card under certain circumstances.