Every situation is different so it’s hard to give a one-size-fits all answer how to get from bad to excellent credit. The anecdote below highlights our general advice. In sum, improving your credit is a journey and the milestones are to continuously refinance bad credit loans.
How to get from no credit to good credit?
I personally moved to the U.S. in 2011 and had exactly no credit history in the U.S. From day 1, the advice I received was “build your credit, you’ll need good credit sooner or later and building credit takes time“.
Three different initiatives helped me to get the ball rolling:
- I got a credit card from a Credit Union
- I took a loan from a Credit Union
- I leased an affordable car for $89 / month
- I made 100% sure I was making every single payment in time
The first two initiatives felt like a silly exercise: my first credit card had a limit of $1,000 but I had to charge it with $1,000 before I could even use it. In other words, my first credit card was more impractical than my debit card. The same was true for my first loan: I borrowed $1,500 at 4% interest but could only do so because I deposited a collateral of $1,500 in a savings account, which I didn’t have access to.
Over the course of the next 6 – 12 months, the Credit Union kept extending me more and more credit while I was making my payments on time. With hindsight, however, the car I leased for $89 / month seemed to have had the biggest impact on my credit.
When I leased my Fiat 500e in 2015, the dealership presented two options:
- $1,200 / month for 36 months
- $89 / month for 36 months with a co-signer
My business partner offered to co-sign for me while I ensured him to set up auto-pay to not miss any payments. Within 6 months, my credit for an auto loan improved dramatically: in March 2015, I could barely lease a vehicle with 36 monthly payments of $89 and by October 2015, the local Credit Unions assigned me to their best credit tier with a score of 746 and offered interest rates as low as 1.99% for a used car purchase up to $50,000.
Best Ways To Refinance Bad Credit Loans
If you buy a used car, it may feel like you’re locking yourself into making big payments for the next 48, 60, 72 or even 84 months. The good news is: you’re not! You can refinance your loan. In fact, we highly encourage you to refinance your loan after making payments for approximately 6 months or more.
The secret is to be patient: regularly checking your credit will negatively impact your credit score. So, once you bought your car, make payments then come back to visit us and we’ll refer you to the best Credit Unions to refinance bad credit loans. Quicker than you think, you’ll have better credit and get out of the chicken and egg dilemma.
For concrete tips to improve your credit, check out Experian’s guide to better credit.