Is it bad or good for my credit score to take a personal loan?
Is it bad or good for my credit score to take a personal loan? Of course, I'm going to pay in time. And pay it out even earlier than in 1 or 2 years or whatever I'll take it. I have a US credit history for about 2.5 years only - I've just moved to the US.
Public Comments
- it may not change either way at first. If you don't have much credit and you take out a new loan, it could actually cause it to go up slightly, but don't expect major change either way until you've made about six months of payments, then it should help.
- In general new accounts and more debt will lower a credit score. Probably not enough to make a big difference. a>
- Your credit score will decrease about 10 points because of the inquiry. But as you pay off the loan, it'll show lenders that you are responsible with paying back borrowed money and will increase your score overtime.
- The calculations used for scoring are a closely guarded secret. You do one thing and it affects something else in the equation. Taking out a loan will affect your debt to credit ratio which is 30% of your score. So, in the beginning, the score *might* drop. As you pay it, the score will go up. The ideal debt to credit ratio is under 19%. What is debt to credit ratio? How much credit line in cards and this loan will you have? For simplicity's sake, lets say you have 3 credit cards and this loan. The loan is for 2000.00 The other cards have limits of 1000.00 each for a total of 3000.00 2000.00+3000.00=5000.00 ( your total credit line. ) When you first start out with this loan, your d to c ratio, assuming the other cards are paid off will be, 40%. Pretty high. 2000/5000=.4 or 40% As you pay it down, the percentage drops and your score goes up. That's how it works. The other negatives are, a ding to your credit score just for them checking your report, and looking for new credit (10% of the score) Don't worry though, scores go up and down all through out life. It's just a means of measuring your ability to repay.
- It is good to have a personal loan as banks are providing loan especially for you people. http://loan-guide.freehostia.com Your credit history can be solved...
