- Personal Finance
Loans: How Will They Can Help With Your Credit Score
How Loans Impact Your Credit Score
Do you have any loans out right now? Or do you wish to take out a loan in the near future? If so, you should understand how a loan can impact your credit report, credit score and whether you can get more lines of credit in the future. Getting a loan is easy, but being responsible with your loan is quite hard sometimes.
Loans Start A Credit History
If you have a loan, you are going to have to make payments on it. With each payment, the status of your account is reported to credit agencies. What kind of loans get reported to the agencies on a regular basis? Some common loan types include:
If you pay off the note each month, you are going to have a positive credit history. If you do not pay off the note each month, it can make lenders wary of you in the future.
Loans Can Help With Credit Mix
Credit mix is an underrated part of your credit score. While you should pay off your bills on time, having multiple types of loans can be a great way to boost your credit score. It is quite easy to have a good mix of loan types. Some ways to achieve this are:
-Having A Credit Card And Student Loan
The credit is unsecured revolving debt while the student loan is a secured and fixed debt.
-Take Out A Car Loan And Student Loan
The credit is unsecured while the car loan is secured in the fact that the car can be taken back to make good on the loan due to non-payment.
Having a longer term loan such as a student loan is also helpful because these types of loans can establish a longer credit history.
Your Credit Card Is A Loan
You might consider your credit card as something that you carry around in your wallet and use to make purchases. However, it is a loan, and as such, you should make sure to pay it down each month. The biggest reason to do so is that the interest rate is usually highest for a credit card, and because having a lower balance increases available credit and increases your credit score.
If you are having trouble paying down a credit card, you should consider things like:
Making sure that these credit loans are paid off each month is the easiest way to establish a credit history.
Don't Shy Away From Loans
A loan might seem like just another debt you have to pay off, but it can be your best friend if used correctly. Loans establish credit history, they add to your credit mix and can add to your available credit limits. All of these factors add to your credit and make it easier to get a better credit score.