How to build credit score?

[Roger]

My score is low because of stupid things I’ve done. How to build credit score back and keep it in good shape on the long run?

[Jeff]

It Take time to build good credit

You need to understand the principles of credit building:

1. 90% of your score is based on your credit activity from the last 2 Yrs.
2. It takes time to build good credit. There are no shortcuts. There are no magic pills.
3. Even if you have derogative items on your credit report – you CAN and you SHOULD start building credit.
4. You need to use credit in order to actually build credit history

Good credit score needs 4 basic ingredients:

1. A steady history of timely payments
2. No recent derogatory items
3. Low balance-to-credit ratio
4. A healthy mix of credit types

So How to build credit score? Here are the two most common ways to build credit:

Secured Credit Cards
You must use credit cards if you want to raise your score. Problem is no company will accept you with bad credit or no credit history.

Fortunately – Secured credit cards are easy to apply and get approved even with bad or no credit because the bank has a security in case that you default.

You need to use the Secured card for small purchases, and keep paying the statements on time. Don’t carry balances on the card. It’s better to pay the statements in full.

See this for more information, and if you can throw in a store credit card as well, do it. They are relatively easy to get.

Secured Loans
Secured loans aren’t a must, but is you want to build a GOOD credit score then you need to use a different type of credit on top of credit cards. Much like secured credit cards, secured loan are easy to get because the bank has a security in case you default on the loan. Simply take a secured loan for, say $300, pay it back in 12 easy payments and establish timly payment history that will boost your credit score. See this for more information.

Just remember not to make the same stupid mistakes as before. If you’re not up to putting the time and discipline it takes, don’t even start.

Lastly, read this list of Credit Building Do’s & Don’ts.

All the best & good luck

[Author]

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