Requirements to Get a Secured Credit Card

A secured credit card uses collateral as the basis for financing. A lender will accept nearly any asset as collateral including cars, homes, businesses, stocks and savings accounts. Secured credit cards are often cheaper than unsecured credit lines because the lender assumes less risk whenever collateral is used. If the borrower defaults, the lender is assured it will recover the funds by liquidating the collateral. Even though secured credit cards are typically easier to get because of the lower risk factor for the lender, there are some minimum requirements.

Have Assets for Collateral

You must have an asset to place as collateral in order to secure a credit line. The lender will take this asset as a deposit only if you can show you have the right to use it in this way. This means you must own the asset or at least have enough equity in the asset to collateralize for the line of credit. If you are only a partial owner of the asset, you will not likely be able to use it for financing. Further, the lender must be able to verify the value of your collateral. The lender will extend a portion of this value, for example 75%, only if they can verify what the collateral is worth. If you are attempting to collateralize a piece of jewelry or a piece of gold, this is much harder to value than a car, home or stock.

Meet Minimum Credit Requirements

Even when you are using collateral, you will have to have a minimum credit score in order to get a credit card. Typically, a score of 700 or higher is considered good enough to secure a new credit card at a decent interest rate. Credit lower than this amount will result in a higher interest rate and lower credit limits. With a secured card, the minimum credit requirements will be lower, but they will still be present. Be prepared for a credit check at the time you apply.

Show Proof of Income

You will have to show you can meet the minimum monthly payments to have a credit card at all, secured or unsecured. Proof of income is typically required for this. If you do not have a job, are a student or have recently lost your job, you may still need to show income in some way. This can be done by using a co-signer or showing independent income through a part-time or freelance job.

Make Monthly Payments

Once you have your card, you need to make monthly payments in order to continue the financing. One of the major benefits of a revolving credit line instead of an installment line is you can choose how much to pay off each month. In any case, though, there will be minimum monthly requirements. Failing to meet these requirements will result in the loss of the credit line and the loss of the collateral. Making your payments on time each month is the only way to protect both your collateral and your credit score.

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