Can a Personal loan improve the Credit Score?

Posted by FriskyLoans on March 29th, 2019

What is the credit score range?

There are a total of six categories which covers all the credit scores. 

1. 0 or -1                              No Credit History
2. 500 – 300                         Bad
3. 551 – 649                         Poor
4. 650 – 699                         Fair
5. 700 – 749                         Good
6. 750 and above                  Excellent

These are the general categorization of the credit score range, but it slightly differs from lender to lender (It can be a company or a bank). 

The credit score of a person is calculated based on five principal factors. 

• New Debt.
• Total debt Owned.
• Credit History.
• Type of loans taken.
• Length of the Credit period. 

How can a personal loan improve the Credit Score?

By clearing old debts: All the old debts can be paid off with these low-interest personal loans. The borrower can start paying off this loan with all new terms.

 On Time: After clearing the previous debts, the borrower will be tension free from the past irregular payment. From now, the borrower must be on regular terms while paying the debts. Through this, the credit score of the borrower will increase. 

What needs to consider while taking a personal loan for increasing the credit score? 

Multiple loans:  It might not be a good idea to take multiple loans while working on increasing the credit score.  The borrower may come across some situations where it is not possible to pay all at ones, and it will result in bad credit score for the borrower. 

Regular EMI's: When a borrower chooses personal loans online, it is likely to be on time payments. It doesn't make any sense with irregular EMI's as it directly has an impact on the credit score of the borrower. 

Loan amount: The loan amount must be according to the requirement of the borrower. It should not exceed the requirement range. 

Pre-payment of the loan: When personal loans for bad credit is for building up the credit history, there is no reason to clear the loan prematurely. The borrower can obtain a good credit history with a long tenure loan. 

Other Debts: A good credit score will make the borrower eligible for many other loans. It might look like a great idea, but it will leave a bad credit score. 

Make use of the personal loan to build up the credit score in a perfect way. A borrower can avail many other loans with good credit score. At FriskyLoans a borrower can avail the personal loans online and enhance the credit score.