What to Do FIRST When You Have Really Bad Credit

May 03, 2018
It might seem like it is impossible to escape a bad credit score. Much of the advice on how to fix a credit score is about people who have fair or average credit. These people can still qualify for bank loans and credit cards, so they can use these things as tools to improve their credit with a relatively straightforward strategy. What if your credit falls into the “poor” range (below 580)? Or what if it is closer to 300?
What to Do FIRST When You Have Really Bad Credit

You need a step-by-step approach. So, what is the first step if your credit is in the “bad” or “poor” range? 

Organize your finances

The first step is to organize your finances. Do not even think about your credit score at this time. What if you need a loan or credit card? There is a way to get loans with bad credit AFTER you take the aforementioned first step.

First, you should make sure that you are earning a steady income. It doesn’t matter if it is a lower salary, as long as it provides a consistent paycheck. Why is this important? Well, first of all, it will help you cover most of your day-to-day expenses so that you do not need a loan or a credit card.

If you still need a loan, you can consider an online personal loan. These loans depend on your ability to repay, not only on your credit score. If you can show a pay stub and bank statement to the lender, then you are likely to be approved. If you have bad credit, this is a way to borrow money without having to apply for a credit card.

Save what you can

Once you have a consistent income, you can start saving some money. This will help you with the next step in the credit repair process. First of all, your savings can help you have cash on hand instead of having to borrow money, OR it can help you quickly pay off an online personal loan if you have one. Any money saved is ALWAYS better than no money saved.

Get a secured credit card

The next step is to get a secured credit card. You can use some of your saved money to pay the safety deposit that is required for such cards. After you have deposited the money, you are free to use the card. Make small purchases with it so that you can build a positive credit history. Then, pay off the purchases immediately. Do not use this card to borrow money that you cannot repay immediately. Continue to use online personal loans if you need to borrow more significant amounts. 

Opt for a “regular” credit card (but don’t change how you use it)

Eventually, your strategy should help you qualify for a “regular” credit card without a security deposit. To continue raising your score, however, you should pay off any credit card purchases immediately and continue to use online personal loans when you need to borrow money that you cannot directly repay.