Years ago, getting a loan was a very simple process. The process consisted of walking into a bank or lending institution and asking for a loan with a smile and a firm handshake. Unfortunately, this system didn’t work well. When it came down to it, the poor tracking meant that banks would loose a lot of money by loaning to the wrong people. These days, to protect the financial stability of the lenders, credit scores were created. Today, credit ratings are numbers that follow everyone around. Their FICO scores tell banks the probability of them paying back the loan that they borrowed.

In this system, FICO scores directly reflect the probability of Americans paying a loan back. The higher the credit rating, the higher the probability of the borrower paying the lender back. Adversely, the lower the FICO score, the lower the probability of the borrower paying a loan back to the lender. With that said, people with low FICO scores are most likely looking for ways to increase them.

One of the best ways that I’ve found for consumers to increase their credit ratings is through the proper use of secured charge card accounts. Secured charge cards are special accounts that allow consumers the opportunity to show banks how they will react to having a charge card account. Before using a new secured credit cards, Americans must place a deposit with their bank that will become their credit limit. Essentially, when using secured credit cards, Americans are borrowing their own money. This alleviates the bank of any possible risk and gives the consumers the opportunity to use their new credit card to build credit scores.

When using secured credit cards properly, consumers notice increases in FICO scores and signs of financial stability. Adversely, when using secured credit card accounts improperly, people tend to find themselves with lower credit scores and in financial hardship situations. So, it is important for Americans that want to improve their credit to use secured credit card accounts properly. Here are some tips to help use secured charge cards properly:

#1: Don’t spend too much: The first tip that I can give to people who wish to use secured charge cards to improve credit ratings is to not spend too much. As a matter of fact, it is a best practice for Americans to keep their balance below 50% of their credit limit.

#2: Make early payments: Next, it is important to make early payments. This is because consumers who are facing the early stages of financial hardships tend to pay their credit card payments right on time or early. Therefore, to display signs of financial stability and allow time for the payments to be processed, it is important that people try to make payments at least 2 weeks in advance.

#3: Pay more than the minimum: To start here, charge card account minimum payments are the minimum amounts that lenders are willing to accept as a payment on a charge card account not the maximum amount of cash that people can send. With that said, it is a best practice to try and double the minimum payments on your credit card accounts.

If consumers follow these tips when using their secured credit cards, their security deposit should be returned within 12 months. At this point, the secured charge card account becomes an unsecured charge card account and Americans will notice an increase in their FICO ratings!

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