If you have recently been working on your credit and feel like you are at a standstill, you may need to find some other options that will cause positive changes to your score. Taking out an installment loan is one option you have, and this will cause your score to increase if you pay it on time each month.
What Impact Does An Installment Loan Have On Credit?
The first thing to understand is the components of your credit score. There are multiple factors that contribute to the score you have. Some of these factors you may have no control over right now, but others you can change. One of these is your payment history, which makes up 35% of your credit score.
Payment history shows how well you pay your bills. If you currently do not owe money on anything, such as a loan, you will not be contributing to this huge factor of your score. If you get an installment loan, you can start contributing to this, and each payment you make will be favorable for your credit score.
What Should You Do And Look For When Getting An Installment Loan For This Purpose?
The first thing you should look for is a lender that reports to the credit bureaus. If you get a loan and the lender does not report, you will not be helping your score at all. The second thing to consider is choosing a small type of loan so you do not go into debt too much. The loan could be as small as $1,000 to buy something you really need, like a computer. You can get small loans like this from banks or credit unions. The length of the loan does not really matter either, but it should be for at least one year.
The third thing to know is that you should not pay this loan off early. Getting the loan and paying it off right away is not going to help your credit score. Instead, make your payment on time each month and allow the loan to fully mature. This will help your score by adding positive payment history to your report each month for the life of the loan.
If your credit score is not moving up like you would like it to, consider getting an installment loan. To learn more about loan options, contact a lender like Las Vegas Finance today to get started.