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How a secured credit card helps build credit

A secured credit card and unsecured credit card are different for a few reasons.

When you get a secured credit card, you are required to put down a small amount of money which acts as a security deposit for you in case you are not able to make one of your payments.

This type of credit card is ideal for individuals whom have just moved to Canada, are starting their credit journey, or are looking to rebuild their credit.

The everyday way to build credit

A secured credit card offers lower credit limits and is easier to acquire than an unsecured card making it accessible to people in a variety of financial situations.

To obtain a secured credit card, you must put a security deposit down.  This deposit acts as a security for the lender.

After acquiring the initial security deposit, the application process is usually quite simple.
By making consistent payments on your secured card, you will have your payments reported to the credit bureaus.

Over time, making steady payments will help you improve your credit rating and build credit overall.

Your financial journey

When you start building credit with a secured credit card, consistent payments are key. If you continue to make your payments on time for a substantial duration, you will have increased your credit rating and be able to apply for an unsecured card.

An unsecured card does not have a security deposit requirement. It also provides a higher credit limit than you would usually be able to obtain with a secured card.

The goal with secured cards is to be able to transition, or graduate, to an unsecured card. Reporting an unsecured card on your file through the credit bureaus shows you are progressing in your credit journey.

Being able to handle credit that doesn’t have security attached to it gives future creditors and financial institutions confidence in lending you larger amounts of credit and entrusting that you will be able to pay it back. Eventually, your credit journey can expand and evolve into car loans, and even a mortgage.

Steps to building credit with a secured card

  1. Save for a security or use the EP Climb Accelerator Plan—to learn more contact one of our credit coach for more details
  2. Apply for a secured card
  3. Make consistent monthly payments on your card
  4. Increase your credit standing
  5. Graduate to an unsecured card


Budgeting tool

For example, let’s say you have a $900 secured credit card limit. In order to build (and maintain) a higher credit rating, you should only use and pay back 30% of the allotted amount ($270) on a monthly basis.

This will help you budget your spending and enforce positive habits, as well as make sure that you are not carrying a balance on your credit card which also affects your rating.

Spending and keeping a balance of anything over 30% does make a difference to your credit score, but staying within a self-imposed budget will keep your credit rating on the right track.

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