How To Use A Personal Loan To Improve Your Credit Score
Posted on: 23 February 2016
Improving your credit score is something that you probably want to do quickly if you are looking to purchase a home or even receive a great car loan. With a good credit score, you will be able to make these two purchases backed with the right financing. This means low interest rates, which also means you will be spending less on the car or home in the long run. There are many ways to improve your credit score. One way would be to receive a small personal loan and pay it off. Here's the best way to use a personal loan to improve your credit score:
Don't Miss Any Payments:
When you obtain a small personal loan, you must be sure that the monthly payments are going to be something you can afford and won't ever have to skip out on. You also don't want to be late on making your monthly payment because this can lead to piled up late fees. Having this on your record can actually make your credit worse and reflect poorly on your ability to make bigger financed purchases, such as a home or car.
Pay More Than the Minimum Amount:
When you apply for a personal loan, it's always best to choose a loan that is going to provide you with the lowest monthly payments possible so that you will be able to pay more than the minimum amount each month. By doing this, you can pay off the loan sooner, which looks better to future lenders and you won't be paying as much in interest either.
Reach the Lowest Balance Possible:
When you first obtain a personal loan, this is the best time to pay more than the minimum each month. Doing this will get you close to less than 30% still owed, at which point you can pay the minimum each month if you want for the remainder billing length. Once your personal loan is down to less than 30% owed, your credit score should be significantly better so long as you were making payments on time each month. At this point, you can expect to be able to apply for a great auto or home loan.
When you utilize these things when applying for a personal loan, you can be sure that you are definitely working towards improving your credit quickly and efficiently. Soon enough, your credit score will be exactly where you need it to be.
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