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By: AgFed Credit Union

Welcome to AgFed Credit Union's MoneyDig blog! 

Get confident about your personal finances with a number of articles, tips, advice and more.


How to Refinance Loans with Bad Credit

 Oct 04, 2021
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It’s usually not until you attempt to get a loan that you realize just how valuable a great credit score can be. Lenders typically price loans based on your creditworthiness. Lower credit scores lead to higher interest rates.

You may feel lenders are punishing you, but the reality is that financial institutions are trying to protect themselves from potential losses. A credit score provides a bird’s-eye view of your money management abilities. If you struggle to manage your money or make payments on time, lenders will perceive you as a higher risk.

However, just because you don’t have perfect credit now doesn’t mean you can’t take advantage of prime loan rates. With a bit of planning and preparation, it’s possible to boost your score in a few months with these tips.


1) Review Your Credit Report

Before you apply for a loan, it’s smart to review your credit report. Knowing where you stand credit-wise will let you know whether you should apply now or if you have work to do.

One of the first steps you should take when seeking to improve your credit score is to check for possible errors or fraud on your report. While many apps and websites allow you to view your credit score, most do not show your entire credit report.

Visit to receive a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion). Review each thoroughly for errors or fraud. Clearing up any discrepancies will help increase your score rather quickly.


2) Update Your Budget

Next, spend time reviewing your finances thoroughly. Your goal is to identify any financial challenges you face that lead to drops in your credit score. Here are some questions to ask yourself:

  • What is causing you to have a lower credit score? 
  • Is it late or missed payments?
  • Do you have a significant amount of credit card debt?
  • Are you struggling to make ends meet regularly? 

Once you understand what is causing your score to decline, you can begin working to fix it. Adjust your budget as necessary to pay down unsecured debt (credit cards) and avoid missing any payments. Small changes can lead to significant increases in your score.

Keep in mind that budgets can adjust as time goes on. Making short-term sacrifices to improve your credit score doesn’t mean they are permanent.

If you’re unable to find ways to better your budget or financial standing, consider speaking with a financial counselor. They may provide the necessary insight into how you can manage your finances more effectively.


3) Speak to Your Lender 

Credit scores range between 300 and 850, with scores typically above 740 being considered great. However, the credit tiers and interest rates offered can vary by institution. It’s difficult to know precisely what credit score you need unless you ask.

In addition to providing insight into credit tiers, most lenders will review your credit report with you if asked. This will help you identify areas for improvement, including additional solutions, such as debt consolidation or loan refinances.

The difference between a C and B credit score, or B and A, could mean saving hundreds, or possibly thousands of dollars in interest, depending on the size and length of the loan.


4) Find a Co-signer 

A co-signer is someone, typically a parent or close relative, that agrees to pay back the loan should you be unable to make the payments. Having a co-signer with a high credit score gives the lender a more positive outlook toward approving the loan.

However, it’s important to understand that asking someone to be a co-signer is a significant risk for that individual. If you’re unable to repay the loan, your co-signer’s money and credit are now on the line.

A common example of a co-signer is a parent helping a young adult child purchase their first car. Since the child may have little to no credit history, obtaining a loan may be difficult. With the parent as a co-signer, the risk is limited for the lender. However, should the child be unable to repay the loan, the parent will be responsible for making the car payments each month.


We’re Here to Help! 

Small steps today can lead to significant financial savings down the road. Simple changes in your credit habits over a few months could provide the much-needed boost in your score to qualify for lower interest rates. But it all starts with planning and preparation.

If you’re interested in learning ways to improve your credit score or are considering a loan, we’re ready to help. Please give us a call at 202-479-2270 to speak with our lending team or email us at

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