Years ago, people who wanted a loan only needed a good firm hand shake. However, today is nothing like it was back then! Today, consumers have a FICO rating. It is a number that follows them around every where they go and lets banks know the potential of consumers paying back money loaned to them! With that said, if you are reading this article, chances are, you would like to improve your FICO rating. Well, I've got just the thing for you!
One of the best ways to improve FICO scores is by use of a secured credit card. Secured charge card accounts work much like standard credit cards. They allow people to use them for purchases and pay those purchases off throughout the following months. The key difference between secured charge cards and unsecured credit card accounts is that for people to use a secured credit card account, they must place a security deposit with the lender. This security deposit becomes the consumers credit limit meaning, the consumer is borrowing their own money. This allows the consumers to show lenders and credit reporting agencies that they are capable of borrowing while alleviating the risk associated with lending to consumers with low FICO ratings.
When using secured credit cards to improve credit ratings, there are a few things that you should remember:
#1. Don't Spend Too Much: The first tip that I can give people who would like to use secured credit card accounts is don't spend too much. Consumers who are facing financial hardships and unlikely to pay back debts tend to spend more than 50% of their credit limit. Therefore, it is a best practice for consumers to try and keep the balance on their charge cards below 50% of their credit line. This will show the lenders and credit reporting agencies that the consumer is financially stable enough to properly use charge cards.
#2. Make Payments Early: The process of building or improving credit ratings is all about showing lenders and credit reporting agencies that you are not facing a financial hardship. Most consumers who are dealing with financial hardships tend to pay their charge card account bills either late or right on time. To ensure that lenders don't think that consumers are in the early stages of financial hardship, it is always best to try and make payments at least 2 weeks before they are due!
#3. Make Larger Than Minimum Payments: Finally, when using charge card accounts to build or improve credit scores, it is important to pay more than the minimum payment. This is because Americans who are facing financial hardships tend to pay minimum payments if they make a payment at all. Also, paying more than the minimum on credit cards allows Americans to avoid a great deal of interest and finance charges associated with their credit card debts!
I hope that this article has given you the information you were looking for. Please come back to read more of my work!
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