Find Out How to Build Credit Using Secured Credit Cards

Many people are reaching the age where it's time to start taking care of themselves. This is the point at which establishing credit is most important. However, the one class they don't teach in school is how to establish credit. There are a few different ways that people can establish credit ranging from opening up new utilities accounts to buying a car from a buy here pay here lot. However, I have found that the best way for people to establish credit scores is through the use of secured credit card accounts.

Secured credit card accounts are credit card products that even Americans with bad or no credit can qualify for. This is because before Americans can use their new secured credit card account, they must place a security deposit with the bank that will then become the credit line for the card. This security deposit makes it so that consumers are borrowing their own money alleviating the banks of any risk involved. Usually, after 12 months, the security deposit will be returned to the Americans if the Americans use the credit card account properly.

This gets us to the part where we will talk about establishing credit. To establish credit, it is important for people to use their new secured charge card account properly. There are a few surefire ways to establish credit with secured credit card accounts. The first of these ways is by consumers spending less than half of their credit line. Generally, when Americans spend more than half of their credit line, it signifies the early signs of financial hardship. Therefore, keeping a balance of higher than 50% of the allowed credit line on a credit card can actually damage consumer credit scores!

The next way to use secured charge card accounts to establish credit is to use your card! Many consumers are under the false impression that just by having a charge card account, they are improving their FICO score. Unfortunately, this is not the case. To establish good credit, consumers have to show that they can “use” charge cards responsibly. By holding a charge card account in the top drawer of a dresser, consumers are only delaying the process of establishing credit. It is important to use the charge card account for purchases but, keep in mind as stated above, people should not spend more than 50% of their credit limit!

Another surefire way to use secured credit cards to establish credit is to make early payments that exceed the minimum payment due. When consumers start to face a financial hardship, they generally send in only the minimum payment just in time or a couple of days late. Because financial hardships are such a risk to banks, anything that signifies financial hardship can have an adverse affect on consumer credit scores. Therefore, it is important for Americans to display their financial strength by sending payments at least 2 week early and that are at least double the minimum payment. This display of financial strength can have a huge positive affect on consumer credit scores!

Above all, it is important for consumers to remember not to apply for a charge card if they are not ready for the responsibility that comes along with them. Improper use of credit cards is the leading cause of financial hardship in the United States. Therefore, secured credit cards can set consumers up for a strong financial future but can also set Americans up for a strong financial hardship if they are not careful. Follow the instructions in this article however and you will be fine!

This article was written by Joshua Rodriguez and is brought to you by:
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