• Secured credit cards are often used by people with no credit history or consumers who need to improve bad credit. Pat Curry of Bankrate advises that secured cards require a bank account deposit of at least $300 to $500, which guarantees the card. The funds are seized if the account holder doesn't make timely payments, and a negative entry goes on your credit report. If the card is kept in good standing, it has many positive effects.
  
  

Current Activity

• People with credit problems often have their accounts shut down by creditors if they make delinquent or partial payments or stop sending money altogether. They may still pay on the closed accounts, or the amounts might be charged off by the lenders. A secured credit card shows up as an active credit line with current activity once it is opened and used. This has a positive effect because lenders want to see how a person is currently handling financial obligations before making decisions on his credit applications.
  
  

Payment History

• A secured credit card works just like any other account, although the credit line may be limited if the consumer made a small deposit. It can still be used for purchases, which means there is a monthly bill. The FICO credit score compiling firm explains that payment history has a heavy influence on the overall score. A good payment record on the secured card, with no delinquencies, can significantly boost the consumer's credit.
  
  

Variety

• Liz Pulliam Weston of MSN Money states that creditors favor consumers who use several types of credit. Ideally, they should have revolving lines like general credit cards, gasoline cards or retail accounts and installment loans for things like vehicles, furniture or appliances. A secured card is considered revolving credit, so it benefits credit records by adding variety if the account holder also has an installment loan.
  
  

Access

• Secured credit cards that are used responsibly give consumers access to more credit because of improved records and scores. Almost anyone can get a secured card, regardless of past financial mishaps, because repayment is guaranteed by the deposit. This initial access to credit grows as the consumer demonstrates an ability to use the secured card appropriately. The card issuer often converts the secured account into a traditional one within 12 to 18 months. Other creditors are more likely to grant additional loans or open other accounts because of the new, positive activity.
  
  

Lower Credit Score

• A properly-used secured credit card rebuilds credit, but such cards are harmful if they are mishandled. The issuer reports all account activity, both positive and negative. Skipped payments and defaulted accounts pull down the consumer's credit score even though the bank gets to seize the security deposit in the bank account.