4.9 Stars - Based on 225 User Reviews

How to Rebuild Credit With Secured Personal Loans

couple in their 30s looking over credit history

There’s no way around it: A low credit score can cause problems. Your insurance rates could skyrocket, apartment applications could be denied… the list goes on. While Bay Country Financial Services places an emphasis on lending based on more than just credit scores, the unfortunate reality is that many other lenders don’t. A poor credit score could mean you’re denied loans that are vital to your well-being. We do have good news, though. Here, less-than-perfect credit scores aren’t a deal breaker. In fact, the personal loans you get with us could be used to bring that score back up! We’ll show you how to rebuild your credit.

Understanding Credit Scores

In short, a credit score is a numerical representation of how trustworthy you are when paying what you owe. This number typically ranges from 300 to 850, with the higher range meaning more options are open for you to receive favorable credit-related outcomes.

So what determines your credit score? It can’t be attributed to any one thing, but here are the big factors:

  • Payment history
  • Credit utilization
  • Length of credit history
  • Types of credit
  • New credit

It’s important to note that a poor credit score doesn’t automatically mean you’ll be denied. If you are approved, however, it could mean high interest rates or other unfavorable terms. That’s why your best course of action is improving your credit.

Benefits of Personal Loans to Rebuild Credit

Enter secured personal loans. Low credit scores aren’t always caused by the people attached to them handling their money poorly. They could be the result of any kind of circumstances. With a loan, you can have access to life’s necessities (like a vehicle) and work on building that score back up with timely payments.

Additionally, a personal loan is one more bullet point in a diversified credit profile. This has the potential to boost your credit score even further!

Rebuild Credit with These Tips

We’re aware that all of the above is easier said than done. So how can you make sure you’re taking as much advantage as possible of your loan? 

  • Assess your credit situation: Obtaining a copy of your credit report is a great starting point.
  • Compare Your Options: Different loans have different terms, so consider everything and make a choice that aligns well with your priorities. Less-than-ideal credit doesn’t mean you’re limited to one option. You still have choices, and you should opt for the one best suited to your needs and habits.
  • Apply Strategically: Apply for an amount that doesn’t stretch your budget too thin.
  • Use the Loan Responsibly: Focus on only making necessary purchases; there will be plenty of opportunities for the “fun” purchases once you rebuild credit!
  • Make Timely Payments: This is one of the most important ones. Late payments can make credit scores plummet and are the cause of many low credit scores.
  • Monitor and Adjust: Keep a constant eye on your credit score. If you aren’t seeing the results you expected, reevaluate your strategy.

Tips for Maximizing Impact

You’ve taken the steps above, so now it’s time to refine your strategy and rebuild credit more effectively. Here are some steps you could take:

  • Borrow Only What You Need: Taking on more debt than necessary can only make it more difficult to keep up with payments.
  • Prioritize Timely Payments: We can’t stress enough how important this one is. This can move the needle significantly in either direction depending on your ability to pay on time.
  • Avoid Applying for Multiple Loans at a Time: Every loan application means a potential hard inquiry on your credit report, which temporarily lowers your credit score.
  • Stay on Top of Your Credit Report and Score: The more you know, the better. Regular checks on the status of your score and report mean you’ll be able to spot potential unauthorized activity as well as have up-to-date knowledge of your score.

Potential Challenges

As we’ve said before, rebuilding your credit score is no walk in the park. It’s still attainable, but it requires commitment. Knowing the challenges that come with the territory can make your credit journey a little less rocky, though.

First off, low credit scores generally mean higher interest rates. This is unavoidable, but planning in advance and factoring these rates into your budget will help you stay afloat and make payments on time!

Additionally, overborrowing is a common trap some people fall into. Taking on too much debt can place an unwelcome strain on your finances and create a snowball effect that can set you back significantly.

It’s Time to Rebuild Credit

Understanding how to rebuild your credit takes effort, but it’s a journey worth taking. Careful planning and strategic action can give your score a huge boost. One of the best actions you can take is utilizing secured personal loans. When you make timely payments, choose favorable terms, and avoid overborrowing, your low credit score can be put in the rearview.

If you have a low credit score and need additional support in enriching your finances, Bay Country Financial Services is always happy to help. The cause of your low credit score doesn’t matter to us. Helping you build it back up does.