Did you know that taking out a personal loan could actually help improve your credit score? No matter the reason for your loan, you have the ability to improve your credit situation based on how you pay it off. Here are three tips to ensure you raise your credit score while paying off your personal loan!
Maintain a positive payment history
The bulk of your credit score, about 35%, comes from your payment history. When you make payments on time, this creates a positive credit history. Don’t let yourself slip between the cracks by missing dates where payments are due.
If you are forgetful, try writing down dates when payments are due! You don’t want to miss a payment just because you are unaware of it being due that day. Write it in a planner, on your refrigerator, or even get your spouse, children, or family members to help remind you of important due dates.
Paying on time will keep a positive payment history and improve your credit score.
Pay more than the minimum amount due each month
As you start to pay off more of your loan, you will likely see a boost to your score. If you pay more than the set minimum amount due each month, this should improve it even further! Paying more than your minimum payment is not required but it will put you ahead of the game and help you out in the long run.
Loan providers love to see an applicant who has a history of making more than minimum payments!
Obtaining a low balance owing as soon as possible
Just like paying more than the minimum amount due each month, the more you can lower the balance on your loan, the better. Let’s say you get a tax refund check and you’re considering what to do with the money. By applying at least some of it towards the principal on your loan, you can decrease your balance as well as the amount of time it will take to repay your loan.
Plus, creditors will see this as a sign of a smart spender and your credit score will likely improve!
If you have read over these tips and are thinking about taking out a loan for vacations, college tuition, unexpected medical bills or any other reason, we can help! Click below to apply for a loan online!