How Getting a Personal Loan Helps Improve Credit Score
Having a low credit score can make it difficult to get a loan for a house or a car. It takes effort and planning to improve your credit score if negative marks are on it. But this is an improvable situation. Getting a personal loan is one way to raise your credit score.
Personal Loans and Credit Scores
To improve your credit score, it’s important to understand the components that make up your score. Credit bureaus measure six different areas of your credit history to determine your score. These include payment history, amounts owed, credit length, credit mix, hard inquiries, and new credit. Payment history is the most important factor, so if you focus on this area, you will likely see a positive change in your score.
2 Ways to Use Personal Loans for Credit Score Improvement
Personal loans can be a powerful tool for building credit. Whether you’re a first-time credit user or looking to rebuild your score, personal loans can help you accomplish your goals. Two primary ways to use personal loans for credit scores are outlined below.
Debt Consolidation
These loans are a great option for those who want to get all their debt paid off under one payment, as they allow borrowers to combine multiple debts into one loan with one payment. With the help of a debt consolidation loan, you’ll be able to pay off multiple debts with one loan and a single monthly payment, often at a lower interest rate.
This loan product is ideal for individuals with multiple high-interest credit card balances looking to save money and simplify their repayment process. Debt consolidation loans provide a more competitive rate of interest than credit cards, which can help borrowers save money and make repayment easier.
Credit-Builder
A credit-builder loan is a type of loan that allows you to build up your credit history. You’re given a set amount of money to pay off over a period. The money you receive is not immediately available for use; rather, it is withheld until the loan is paid in full with interest. After the loan is paid off, the money is given to the borrower and can be used in any way they choose, such as to increase their emergency fund, pay off small debts, or meet other financial objectives. It’s almost like you were putting money into a savings account but with the extra perk of an improved credit score.
Using a credit-builder loan helps create a record of on-time payments, giving you a credit score lift. However, not everyone needs a credit-builder loan. You will incur costs when taking out the loan and need to budget for the interest payments. This will most benefit people who have poor credit history or no credit history and want to save money while improving their credit score.
Is a Personal Loan Right for You?
Personal loans are a practical and effective way to build credit. They can be used to pay off existing debts, which can help improve your credit score, or to finance large purchases that can help establish or improve credit. Whether one uses a personal loan to pay off debts or make large purchases, it is important to remember to make all payments on time and in full. This will help ensure that credit scores remain high and that one has access to attractive loan terms and interest rates in the future.
King of Kash has provided affordable, low-risk personal loans with no credit check for almost 40 years and is one of the fastest-growing money lenders. We are dedicated to helping our customers and loan applicants meet their financial obligations with fast, low-cost signature loans that don’t require a traditional credit check and zero collateral down. If you need a no-credit-check personal loan online, get in touch with us today!
Cary Silverman is a consummate entrepreneur having sold multiple companies during his 20 years of business experience in the financial industry, but for him, it isn’t about the money. His success is rooted in his passion to focus on doing something better today than it was done yesterday. These days, he’s the CEO of Waldo General, Inc. that oversees the operation of King of Kash.