How a Personal Loan Can Improve Your Credit Score

Personal loans can be a great way to get access to cash if you’re in a pinch. They’re commonly used for emergencies, home renovations, and debt consolidation. And sometimes, taking out a personal loan can actually help to boost your credit score. Let’s dive deeper into what a personal loan is and how taking one out can improve your credit score.
What is a Personal Loan?
A personal loan is an unsecured loan, meaning there’s no collateral like a home or car backing it up. These loans generally come with a lower interest rate than credit cards and enable you to pay back the balance with predictable monthly payments over a set period of time.
People use personal loans in various ways, including covering emergency medical bills, making home renovations, or consolidating debt. And if you’re smart about using a personal loan and paying it back on time, it may help to increase your credit score.
How Personal Loans Can Boost Your Credit Score
If you’re actively working to better your credit score, taking out a personal loan can help by impacting several areas of your credit score, like:
Could a Personal Loan Hurt My Credit Score?
Taking out a personal loan has a lot of positives for your credit score. But that doesn’t mean there aren’t potential downsides to consider. By getting a personal loan, you could see a decline in your score if:
The Bottom Line
Taking out a personal loan can help to improve your credit score. Just remember that there are also risks to consider. Ensure that you have a well-defined purpose for taking out the loan, whether it be debt consolidation or emergency relief, and put a plan in place to ensure you’ll make timely payments to help boost your score.
Notice: Information provided in this article is for information purposes only. Consult your financial advisor about your financial circumstances.
Source: iQuanti, Inc.