The Frugal Creditnista

Rebuilding & Establishing new credit is a vital part of our credit restoration process.  One of the best ways to do this is via a Secured Credit Card.

A secured credit card looks and acts as a regular credit card except… you’ll be required to put down a security deposit (ranging from $300 – $2000).  This security deposit amount is equal to your credit limit; it acts as a ‘security’ in the event you are not able to make your payments. Therefore, the amount of your security deposit will always remain the same; while the credit you have been extended on your secured credit card will fluctuate based on usage.

This is not a debit card; you are still being issued credit from a bank.  Further; your spending activity is NOT reported to the credit bureaus with a debit card.  Your spending activity IS reported to the credit bureaus with a secured credit card.  Thus, your score can increase with positive payment history and usage; and can decrease with poor payment history and poor usage.

Best Practices for Success In Building Your Credit:

  • Pay On Time!  Better yet; pay off every month in full; it increases your score faster
  • Only use between 5-30% of your approved amount.  For example if you have put down $300; you only want to spend $15-$90  per month.  KEEPING BALANCES LOW IS VERY IMPORTANT.  Pay off before or on the due date. Before is best, however at the very least pay on time – no exceptions!
  • Increase your security deposit if you can; this will increase your credit limit.  This does not mean you need to increase your spending!  Keeping balances low is very important; increasing your credit limit is just as important because it positively affects your utilization rate; which makes up 30% of your credit score.
  • Try to select cards that give you the option of turning it into a Unsecured Credit Card after a certain amount of on-time payments.  Let’s face it; interest rates are high on secured credit cards; being able to switch over to an unsecured card as soon as possible will save you a lot of money over time in interest fees.



(Note:  If you have a recent bankruptcy, please stick with the first option above).

Credit Builder Loans are a great way to begin building or rebuilding your credit!

An ideal credit profile typically has 2+ credit cards and 1+ installment loans.

If your credit profile is in need of an instalment account, then a credit builder loan is definitely the right move!

Installment Accounts are student loans, car loans, personal loans, home loans, etc.

Having a mix of credit cards and at least one installment loan accounts for up to 10% of your credit scores. Paying them on time and per the terms of the company's agreement, makes up 35% of your credit scores. Together, that's up to a whopping 45% of your credit scores!

Below are Credit Builder Loans that our clients and students have personally used to build their credit:

  • Self Lender
  • Credit Union Credit Builder Loan
  • Community Bank Credit Builder Loan


Happy Building!