Opening Credits

Q&A: How to make the transition from secured to unsecured credit card


Most of us learn how credit scoring works the hard way, which can stall progression from a secured card to an unsecured product.

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QuestionDear Opening Credits,
I was promised unsecured credit on a secured card five years ago. That hasn’t happened. I’ve learned (the painful way) to pay down a balance and minimums, no thanks to the institutions. My question is, why do I need to keep three-quarters of my available credit open to convince a creditor that I’m a good funds manager? My bills are paid on time (rent, utilities, storage units), though these don’t report to the credit bureaus. Is there a way I can send my monthly spending sheet to the credit bureaus for good credit management points? – Norma


Dear Norma,
It seems you were under the impression that this secured credit card would automatically become unsecured after a certain period. As you discovered, such conversions are not guaranteed. They’re often based on your borrowing and repaying behavior, but not all secured cards are upgradeable.

Nevertheless, your job was to demonstrate that you can handle this particular credit card as well as other cards, loans and debts that show up on your TransUnion, Equifax and Experian reports.

Regular household bills are not listed on credit reports because they aren’t credit products. They will only show up if they’re significantly delinquent or have been sold to third-party collectors. There are rumblings about adding data from unconventional sources, such as cellphone contracts, rent payments and utility bills, to credit reports, but that hasn’t become mainstream yet.

A credit card issuer is most interested in how you handle real forms of credit. Most important are on-time payments and low credit utilization.

Essentially, you should use the card but pay what you charged in full or close to it. Carry as little debt as possible.

Why is that, you ask? The closer you get to maxing out your credit limit, the greater a signal it sends to lenders that you may be headed toward financial trouble. Low utilization shows that you are just borrowing a bit here and there and have no problem paying off what you owe.

Low credit utilization is particularly important with secured cards, which tend to have low credit limits. With a $500 limit, for example, one unexpected auto repair bill can eat up a lot of the available credit. If you must charge a big chunk of your available credit, it is good to get into the habit of paying off the charge immediately. That way, the odds are you will have wiped the charge off your account before your bank reports it to the credit bureaus.

Speaking of the credit bureaus, have you made sure your lender is reporting your good behavior to the three credit bureaus? Most secured cards do give a monthly summary of your credit activity to the bureaus, but not all do. A positive credit history, visible to other lenders, is what you need to escape from a secured card to an unsecured one.

Check all three credit reports via By law, you’re entitled to one report from each bureai for free, once a year. You can also get your TransUnion credit report for free from

Video: What is a secured card?

So back to that secured card. Most people get these types of accounts because they either haven’t established a positive borrowing and repaying history yet or they want to add positive information to a credit report already riddled with problems.

Secured cards are ideal for both of these situations because the cash deposit you put down vastly reduces the amount of risk the issuer takes in bringing you aboard as a customer. If you rack up a big balance and then run off, the issuer has the right to take what you owe from the funds held in deposit.

Some credit card issuers will reevaluate your credit history after a period (usually six months to a year or so) to determine if you qualify for an unsecured product. If so, the account will transition and you’ll get your deposit back. If not, it remains secured, which is where you are now.

I agree that it would be nice if the issuer gave explicit instructions on how to use the credit card for it to be converted, but that was up to you to figure out. And you did, after a few stumbles. Maybe you paid occasionally or accumulated too much debt. That’s OK. The wonderful thing about credit cards is you have the power to control the future!

From this point forward, send payments for all the accounts that are appearing on your credit reports by the due date. If your financial obligations are excessive, stop charging for a while and concentrate on paying off debt.

The sooner your balances are close to or at $0, the faster you’ll be eligible for an unsecured card with your current issuer or a new one. Just apply judiciously. Excess inquiries will drive your credit rating down, so use’s CardMatch tool to know which cards are truly within reach.

See related: Going from secured to unsecured: How it affects your credit score, 9 things to know about secured cards

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