How to Boost Your Credit Score When You Need Good Credit to Do It



This post originally appeared on Go Banking Rates.

It’s a bit like being stuck in a big catch-22: Trying to improve bad credit, when you need good credit to improve bad credit, which can prevent you from getting good credit, can create a confusing cycle that is as dizzying as it is frustrating.

If you’ve been faced with this never-ending puzzle, you’re not alone; according to Experian, out of 220 million Americans, 1 in 5 has bad credit. If you belong to that 20% of people with a low FICO score, you’ve probably asked yourself this simple question: how is a person supposed to improve their credit when it takes good credit to use most of the products/tools that are often recommended? to rebuild credit?

Although the answer is not obvious, you can save yourself from the bad credit doldrums. There are several options at your fingertips to get you back on track and improve bad credit.

Credit? What credit?

What is bad credit? It’s a poor reflection of a person’s financial transaction history that can make it difficult (if not impossible) to get a credit card, mortgage, or car loan. Lenders and banks are hesitant to lend money to people with poor credit because they are considered high-risk borrowers who are notorious for not repaying their debts on time.

Simply put, bad credit is usually the result of poor financial choices. Maybe you bought a house or an automobile and fell into arrears? or, as a student, you fell head over heels in credit card debt and failed to pay off your balances in a timely manner. Circumstances sometimes dictate the ebb and flow of our financial behavior – even people responsible for their money can run into debt, unable to pay their credit card or their car after losing a job.

Whatever the cause, you might have ruined your own credit without even knowing exactly what credit is. With many life lessons, hindsight is always 20/20, and only after realizing the mistakes we made – like understanding how credit scores work – that we can start making better decisions about our financial future.

Credit Scores — A Numbers Game

A credit score is a numerical calculation that determines the likelihood that a person will repay a loan or borrow money on time. When your credit card bill is paid on time, in full, it helps boost your score. If you miss a payment (or more), your score drops, making lenders less likely to lend you money in the future.

Every time money is withdrawn on credit, lenders report your activity to three national credit bureaus, which use three separate ranking criteria to determine a person’s credit health.

  • Trans Union: Precision
  • Experian: FICO Advanced Risk Score (Fair Isaac Corporation)
  • Equifax: Pinnacle

A FICO score is the most commonly referenced model of credit and ranges between 300 and 850 – 300 being the worst, 850 being the best.

credit score

From the table above (courtesy of, a great score is for the elite few with perfect, unblemished credit history – they will qualify for the best loan interest rates. and will deliver without complications.

A modest credit score in the mid-600s, which looks respectable, is still too low to set a low APR on a loan. Choosing between a 10% interest rate or no loan at all is like choosing the lesser of two evils. A credit score of 500 or less is troubled and may qualify for the worst loan, if the credit holder is not denied outright.

Credit inquiries can also hurt your score. If you apply for a credit card, the lender or creditor in question will perform a standard check of your credit score to see if you qualify. But it will lower your score and has disadvantages for people with bad credit. You’ve applied for a card to rebuild your credit…but the application itself is further damaging your credit.

Loans for bad credit

Believe it or not, they can happen. According to, the face-to-face approach with an understanding lender can get you closer to getting a loan and improving your credit through traditional means.

  • credit unions. Independent property managers sometimes forgo a credit check and rent an apartment based on a potential tenant’s good impression. Credit unions are similar; with an in-person meeting with a CU representative, they may be more willing to ignore your credit score and watchyou as a person when a loan is being considered.
  • Loan between peers. For someone with bad credit, a personal loan can be a more flexible option than dealing with standard bank rules. This way, things like interest rates and payment terms can be negotiated person to person.
  • Collateral. You might be able to get a loan by putting something of value in place instead of having bad credit. Pawnbrokers lend money if you pawn jewelry or other valuables; the item is sold if the loan is not repaid on the agreed date. In larger cases, a person may pledge a car or house as collateral against which to borrow. However, this is not recommended due to the serious risk of loss of property and other assets.

Credit cards for bad credit

If you have bad credit, chances are you’ve tried applying for a credit card once or twice, but been turned down. Another option designed specifically for people with bad credit is the bank-secured credit card.

Compared to unsecured accounts, a secured credit card is secured for a minimum credit limit:

  1. To help slowly build your credit score, and
  2. To reduce the risk of going over your credit limit and going into debt.

Secured cards require large deposits — typically $200 to $500 — which become your credit limit. But beware ! Secured credit cards carry high interest rates – make a late payment and you could not only be penalized 29% interest, but further damage your credit history.

A secured card is like a rehabilitation for bad credit, and many financial institutions provide them, including CapitalOne, Wells Fargo and Orchard Bank.

Defend your credit

You’ve dealt with the downsides of bad credit, and now you’re taking the steps to rebuild it. That doesn’t mean you should stop monitoring your credit report and history. Did you know that 79% of all credit reports contain errors?

Challenge your credit report with the bank or credit agencies if you believe an omission has been made or if a recently settled debt remains outstanding in your records.

It was also reported by the National Association of States Public Interest Research Groups that 54% of all credit reports contain the smallest of typographical errors, which can lead to someone else’s bad credit. end up on your credit report. Don’t let this mistake stop you from improving your creditworthiness.

How to take advantage of good credit

Congratulations! You’ve reached 700 and you’re climbing. Now the last thing is to maintain your good credit rating. There are some things you can do to take advantage of good credit and maintain a high score.

  • Keep yourself informed. Monitor your credit report regularly and check your score and history at least every few months. Cross-reference them with your credit card and bill statements and check for inconsistencies.
  • Pay your bills on time. Nothing hurts your credit more than delays. Lenders don’t like to wait for their money.
  • Aim low. Take advantage of your better credit score and stick with car salespeople and mortgage lenders to secure a low interest rate. It’s a simple contrast: high credit score = low interest rate.

Think of maintaining credit as a new exercise program – a lifetime commitment that must be practiced regularly lest we fall into bad financial shape. Follow the steps to get yourself out of a credit conundrum, rebuild your credit, and start over with a good credit score.

Above all, be patient. Credit bureaus won’t immediately reflect changes to your history, so even if you’ve been following better spending habits, don’t despair. Earning a high credit score is worth more to your financial health than any dollar amount could ever tell.

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