At a Glance
A low credit score of 408 can tell lenders if you previously had trouble making credit payments. As a result, you might have trouble obtaining a credit card or loan without paying exorbitant interest rates until you have the chance to establish your credit.
If you want a credit card, personal loan, auto loan, or mortgage, having a credit score of 408 will make the process much more difficult. A credit score of 408 can indicate recent financial problems or a lack of credit history. Those who apply may need to pay more or make deposits on their credit cards if their credit score is below 408. It will also be challenging to get authorized for an unsecured credit card. When a borrower's credit score is in the "extremely bad" level, which translates to unfavorable credit, many lenders will decline to work with them.
Now that we have explained what can happen when your credit score dips low, let’s dig deeper.
Is 408 Credit Score Good or Bad?
Unfortunately, a credit score of 408 is a bad credit score. FICO and VantageScore (the companies that produce the leading credit scoring models) have placed 408 in the low credit score range.
What Impacts your 408 Credit Score?
Primarily, six factors impact your credit score. The first and most important is your payment history, followed by the debt owed, credit utilization ratio, late or missed payments, and recent credit activity on your account. To improve your credit score from 408 to a better one, you must first identify the factors that affect your credit score. Some of the factors are:
- Public information
- Credit Utilization Ratio
- Late or missed payments
- Length of credit history
- Total debt and credit mix
- Recent credit activity on your account
If you have suffered from bankruptcy or foreclosure in the recent past, it will be visible on your credit report, and your credit score will take a huge hit. Even though your credit score may increase before the bankruptcy report disappears from your record, there is a high possibility that lenders might refuse to work with you because of bankruptcy billing.
Credit Utilization Ratio:
To improve your 408 credit score, it is advised that you keep your credit utilization within 30%. To calculate the overall utilization ratio, calculate the balances on all your credit cards and divide by the sum of borrowing limits.
Late or Missed payments:
Your credit score will significantly hit if you miss your credit card payment. So if you see that your credit score has fallen to 408, you should look into how many late or missed payments have happened from your end. Paying your bills consistently is the most critical thing to do to improve your 408 credit score, as it accounts for 35% of your FICO score.
Length of Credit History:
Along with other things, the length of your credit history is also a detriment to your credit score. The number of years you have been a credit user can influence up to 15% of your FICO score. NTC (New to Credit) users must be patient and careful to avoid bad credit behaviors.
Total Debt and Credit mix:
The FICO credit usually favors users with multiple credit accounts and revolving and installment credit. If you have only one kind of credit account and your credit score is 408, it might help if you broaden your credit portfolio. Remember that credit mix and total debt make up 10% of your FICO score.
Recent Credit activity:
If you are someone who keeps applying for new loans and credit cards, your credit score might take a hit. Some companies trigger a check known as a hard inquiry when you apply for loans or credit cards. What happens during the hard inquiry is that the lender obtains your credit score to determine if you can get the credit line or not. Hard inquiries might drop your credit score by a few points, but it rebounds within a few months if you keep up with your credit card bills. New credit activity can account for up to 10% of your FICO scores.
What does a Credit Score of 408 mean for your Life and Finances?
Your 408 credit score can affect you in many ways, and having a poor credit score might make your financial life difficult and full of hassles.
Here’s what your life will look like with a credit score of 408:
- You will pay higher interest rates and loan fee
- You might face issues getting a job, apartment, and other essentials
- Giving deposit for utilities
- Higher insurance costs
- Difficulty finding an apartment
- Difficulty finding a job
Can you get a Credit Card with a 408 Credit Score?
Yes, you can get the Azpire Credit Builder Card to build your credit score from 408. While it is usually difficult to get a credit card with a low credit score of 408, it does not translate to financial suicide. The Zolve Azpire Card, a secured credit card, is available to all, even if you fall under NTC (New to Credit). Applying for this secured credit card is one of the greatest strategies to repair your credit.
How to Improve your 408 Credit Score?
Changing your poor credit score from 408 to a fair (580-669) to a good one (670-739) is gradual. First and foremost, you need to figure out how much debt you owe. Remember to avoid any business or financial consultant who promises that they can magically increase your 408 credit score within a few days or weeks. Some of the steps you can take to improve your 408 credit score are:
- Paying your bills on time
- Avoiding high credit utilization
- Debt management plan
- Credit builder loan
- Use a secured credit card
- Establish a credit mix
Paying your bills on time:
The holy grail of improving your credit score is to pay your bills on time. If your credit score is 408 and you are looking for ways to increase your credit score, this is the way to go.
Avoid high credit utilization rate:
No matter how many accounts you have, try keeping your credit utilization to 30% to avoid lowering your credit score.
Debt management plan:
If you are facing challenges while paying your credit card bills, a debt management plan can come in handy. You need to work with a non-profit credit-counseling agency to work out a manageable repayment schedule. Remember, opting for a debt management plan will close all your credit card accounts, severely lowering your credit score. But that can be regained with good credit behavior. But, if this sounds too extreme for you, you can always consult a credit counselor to improve your 408 credit score.
Credit builder loan:
Multiple credit unions offer these small loans designed to help NTC users build their credit. These loans help you build credit if you maintain the stipulated payment behavior.
Apply for a secured credit card:
This usually comes with a small credit limit, often only a few hundred thousand dollars, and you have to put down a deposit in the total amount of that limit. As you use this card and make regular, timely payments, the lender reports those activities to the national credit bureaus. Your credit behavior is recorded in your credit files and reflected in your FICO score.
Look no further if you want to improve your 408 credit score by applying for a secured credit card.
Folks, meet the
Zolve Azpire Card
What is it?The Zolve Azpire card helps you build credit using your own money. It is a credit builder card that helps you start building your credit score from the first transaction. It is available to all, even if your credit score is as low as 408.
We record every swipe of your Zolve Azpire card, and by the month’s end, we add up all the transactions for the month and report it to the bureaus so that your credit score gets built for a better financial future.
Establish a credit mix:
The FICO scoring model favors users with multiple credit accounts, along with a mix of different types of loans, including installment loans like mortgages, car, and home equity loans.
A poor credit score, such as 408, can significantly impact your financial life. Yes it can be disheartening to see that your credit score has dipped as low as 408, but this does not signify the end to your credit-building. If you plan on bettering your credit score, you have to start somewhere. Increasing your 408 credit score to the fair range (580-669) could help you access increased credit options, loans, reduced fees, and terms, along with lower interest rates.