Friday, December 10, 2010

How Can I Build My Credit Score From 400?

Bad credit score has made us in a very inconvenient position when we need to apply for a loan. Especially when the credit score is less than 600. A lower credit score gives us lesser financial options and lesser favorable credit offers. Therefore, if we are already have a bad credit score, we would have to take some action to build and improve our credit score. There is certainly no way to boost our credit score instantly. However, gradual improvement is possible, regardless of our credit history. We will get the credit score that we desire with patience, time and tenacity.

Let’s go to the main topic, How can I build my credit score from 400? First, get a secured card. If you are a student, you may easily qualify for it. A secured card is the type of card where you put a security deposit and your credit limit is equal to the deposit amount. Most people can get this sort of card as long as the credit score does not rock bottom like less than 400. Use this secured card to rebuild your credit score. Give yourself about 2 years and focus on the payment history. Maintain a good payment history by paying off all your bills on-time every month.

The credit score is basically relates to your 12 months credit expenses activities. Normally, the credit score may fluctuates around 5% to 10% every month. If you are continuously employed for at least 18 to 24 months, and maintain at least $500 in your saving account, you should be able to convert your secured card into a secured credit card. Most banks should be able to set it up for you. As a reminder, you are using this secured credit card to build your credit score. Use it for minor expenses like gas or fuel, and other small purchases. Always pay the balance in the following month on-time. Most importantly, you must ensure that this payment history is report to the credit bureau.

Next, you can go to a jewelry store and purchase an inexpensive (less than $200) item on credit. Be up front about why you are doing it. With the credit you do have, you should be approved. Verify that they are a credit reporting business, not a "Mom and Pop" outfit.

If you are following the above journey, with every time on-time payment for about a year of time, you can then go to a major department store and apply for a store credit card. You may qualify for it. Again, as a reminder, you are using this store credit card to build your credit score. Use this card for few months (at least 6 months) by practicing a good on time payment history. After that, you can apply for a secured VISA credit card with $500 limit. With your good on time payment historical record, that bank may convert the secured VISA credit card into the normal credit card within another year. In fact, you can find out with the bank and discover credit card that has lots of rewards and privileges that they can offer to you. Remember, always maintain good on-time payment activities and you will notice that you are continuously improving your credit score from bad credit.

The above is my personal experience. And I hope it can help people who are seeking ways to build and improve their credit score from bad credit. How can I build my credit score from 400? Overall, it is just about maintaining an on-time payment attitude. Building a credit score takes time, patience, and tenacity.

Note: Contacting debt collectors about old debts on your credit report can be a tricky move to make. Remember, only do this if you have money saved up to offer up front settlements for less. Debt collectors don’t like small payments with installment, paying the debt this way will not reactivate closed accounts and give you good credit.

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