Years ago, getting a loan was a fairly simple process. All people had to do to get the cash that they needed was walk into a lenders office with a bright smile and firm handshake and they would most likely qualify for a loan. Unfortunately, this system was so efficient. As a matter of fact, many smaller lenders went out of business because of non payment on loans. This created a demand for what we know today as credit scores.

Credit scores are numbers that are calculated by credit reporting agencies and follow consumers around wherever they go. The FICO ratings that consumers are given directly reflect that Americans probability of paying a loan back. This means that people with lower credit scores tend to not pay back loans and consumers with higher FICO ratings tend to pay back their loans promptly. With that said, it is easy to see why Americans with good FICO scores find getting a loan to be an easy task. Adversely, consumers who have bad FICO scores find the same task to be a very daunting one.

Building credit scores can be as simple as using charge card accounts. I know what many Americans may be thinking, “If I have bad credit, how can I get a charge card?”. The answer is secured credit cards. Secured credit card accounts are specialty charge card products. Before Americans can use a new secured charge card, they must first place a security deposit with the lender. This security deposit becomes the credit limit that will be given to these Americans. Therefore, the consumers are borrowing their own cash in an attempt to show lenders and credit reporting agencies how they would react to a loan.

Once consumers get a secured credit card account, all they need to do is use it properly. If the secured credit card is used properly, it will become an unsecured charge card within 12-18 months and at this point, Americans will have good credit. With that said, here are the tips to using secured credit card accounts properly:

Tip #1: Don’t Pay Late: Have you ever been at a job where the boss didn’t have the money to pay on Friday and had to pay on Monday. The consumers who go through this situation are never happy. Well, neither are the lenders that go through this. The due date is the date that payments are due, not the day that they should be put in the mail. With that said, it is in the best interest of Americans to try and make their charge card payments at least 2 weeks in advance.

Tip #2: Keep Balances Manageable: I’m sure that most Americans have heard the term spiraling into debt. Well this is because although people may think total balances are manageable, they find themselves spending more on their charge cards because their cash is spent on credit card bills. To be sure that this doesn’t happen to them, it is a best practice for consumers to keep balances below 50% of their credit limit!

Tip #3: Don’t Make Minimum Payments: Consumers who are facing early financial hardships usually make minimum payments. Because increasing FICO ratings is all about showing signs of financial stability, it is important not to show signs that people facing financial hardships generally show. With that said, it is a best practice for people to double their credit card account minimum payments.

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