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I want to buy a single high priced item for myself before the new year and I'd like to know if getting a secured credit card for, say, $1500.00 and then maxing it out to buy this single item will help my credit as I'll pay it off in a few months, or if maxing out the card will actually make my credit worse. I do need a secured card to start repairing my credit but I don't know if this will help it or make it worse.

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    Wait a second. You are going to send $1500 to the bank to get a secured credit card. Then you will use the card to buy an item worth $1500. Then you will take several months to pay off the credit card. At what rate?
    – mhoran_psprep
    Commented Dec 8, 2014 at 10:31
  • Why not simply spend the $1500 directly on the item?
    – gerrit
    Commented Oct 22, 2015 at 18:17

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Yes your credit could potentially take a slight ding in the short term. However, once it is paid off (assuming it was timely payments) your credit would not suffer from the purchase.

The reason your credit would be affected in the short term, is because your credit utilization would increase. Credit utilization plays a significant role in determining your credit score. But, once you paid it off then your credit utilization would be back to normal and hence would no longer affect your score.

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Without knowing more about your current situation, it is hard to know how this scenario would affect your score. It really depends on what your current score is, what your current credit limits are, and how much debt you are currently in.

However, I do not recommend you pay interest you don't need to pay just to attempt to increase your credit score. It seems silly to send $1500 to the bank, then borrow $1500 from the bank and pay interest on it. Are you currently in debt? If you want to increase your score, pay off your debt. If you want to attempt to increase your score by using a secured credit card, then get a small one, use it for small purchases, and pay it off in full each month. Don't pay interest if you don't have to.

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Without knowing the specifics of your situation; if you need to repair your score, getting any credit card and maxing it out is a terrible idea.

Credit cards and installment loans show up on your report differently. Utilization of credit cards is a significant part of your credit score. If you need a secured card to repair your credit I'm going to assume it's your only card which will have a credit utilization of 100%. Getting an actual loan for the item would be a better route, if you're intent on obtaining this item with some kind of debt instrument.

If you need to repair your credit you should buy the item with cash. Then send $500 to the bank, use that secured card for gas and pay the balance to zero every month.

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Maxing a card will certainly cause a noticeable ding on your credit while it exists. I can see the dip in my credit rating from where I ran one card to 98% of it's limit (One large charge, I wanted to get the rewards.) When I paid it off it went back to where it was, though.

Note that there's no need to pay interest to build your credit rating. We have 800+ credit ratings despite not having paid a penny in interest for anything that is on our credit reports. You make your charges, you pay them off after you get the bill so the card reports a balance and that you paid it. Repeat next month.

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