Many consumers 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 consumers 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 consumers to establish credit scores is through the use of secured charge card accounts.
Secured credit card accounts are credit card products that even consumers with bad or no credit can qualify for. This is because before consumers can use their new secured credit card, 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 Americans are borrowing their own money alleviating the banks of any risk involved. Usually, after 12 months, the security deposit will be returned to the consumers 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 Americans to use their new secured charge card properly. There are a few surefire ways to establish credit with secured credit cards. The first of these ways is by Americans 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 charge 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 people are under the false impression that just by having a credit card, they are improving their credit rating. Unfortunately, this is not the case. To establish good credit, Americans have to show that they can use charge card accounts responsibly. By holding a credit card account in the top drawer of a dresser, people are only delaying the process of establishing credit. It is important to use the credit card for purchases but, keep in mind as stated above, consumers should not spend more than 50% of their credit limit
Another surefire way to use secured charge cards to establish credit is to make early payments that exceed the minimum payment due. when Americans 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 people to remember not to apply for a credit card if they are not ready for the responsibility that comes along with them. Improper use of charge card accounts is the leading cause of financial hardship in the United States. therefore, secured charge card accounts can set people 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