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It is no secret that your credit score is very important to your financial stability. Consumers with excellent credit scores qualify for lower interest rates, more money and more rewards! With that said, I’m sure you can see why many consumers want to build their credit scores as fast as possible. I have found that the fastest way to rebuild or establish credit is by using secured credit cards.

Secured credit cards are credit cards that consumers must place a security deposit with the bank to use. The security deposit placed with the bank then becomes the customers credit limit. So, essentially, you will be borrowing your own money. This process takes all of the risk away from the lender all while allowing them to see how you will react to available credit and debt. By using secured credit cards properly, you can be on your way to excellent credit in no time! However, secured credit cards are capable of harming your credit just as fast as they can help you to establish it. With that said, it is very important that you do use your secured credit card properly! Follow these instructions and you should be fine:

1. Never Spend More Than 49% Of Your Credit Limit: The key to using secured credit cards to establish or rebuild credit is to show signs of financial strength and alleviate any signs of financial hardship. One of the things that most consumers will do at the beginning of a financial hardship is spend more on their credit cards. Consumers in financial hardships historically spend more than 49% of their credit limit because they are forced into doing so. With that said, if you spend more than 49% of your credit limit, you may be insinuating to the lenders that you are in the beginning stages of what may become a severe financial hardship. Also, spending more than 49% of your credit limit gives you a higher chance of carrying debt for a long period of time. By keeping your balance below 49% of your credit limit, not only will you show financial strength, you will also be able to pay your balance off a lot faster than if you were to spend more than 49% of your credit line.
2. Never Make Minimum Payments: Minimum payments are just that. They are the minimum amount of money that the lender will accept as a payment on a loan. However, minimum payments are known as minimum payments not maximum payments. Not only are you allowed to pay more than your minimum payment each month, it is something that you should make a conscious effort to do! Paying your minimum payment on any loan can insinuate to the banks an early sign of financial hardship. It is a best practice to look at any loan statement and multiply the principal payment by 2. Your payment should be your interest payment + 2 X your principal payment. Not only will this show financial strength to the lenders, it will also allow you to avoid a great deal of interest and finance charges!
3. Do Not Make Your Payments On Time: Now does that sound weird or what? Well, obviously I’m not going to tell you to make your payments late. So our only other option is making them early! It is a best practice to send payments in at least 2 weeks before the due date. This shows not only a high level of financial strength but also a high level of awareness of debt. Both of these signs are very good!

If you follow the 3 tips above, you should receive a refund of your security deposit within 12 months. At this point, your secured credit card has become an unsecured credit card and your credit score has become fair to good. Continue with the steps above and you will build your way into excellent credit within another 12 months!