If you’ve got big financial goals, you need credit to reach them. Credit is key when it comes to making big life purchases, like a home or a car. The better your credit, the better the interest rate you’ll receive on loans. Credit can also help you get a good insurance policy.
All these credit goals are in reach, but how do you get to good credit from where you are?
A personal loan might be one of your best options to build credit. Because your credit score is determined by factors such as payment history and credit mix, a personal loan is a useful tool for credit building. To give you a better idea of how it works, we’ve put together our top tips when it comes to getting a personal loan to build credit.
Talk to a Loan Specialist
Everyone’s finances are different. We all have different circumstances which affect our credit scores. That’s why it’s good to talk one on one with a loan specialist. You’ll have the benefit of a professional set of eyes on your finances, guiding you to the right loan for your credit goals. At World Finance, we talk with people every day to help figure out the next best step for their credit health.
Building credit with a personal loan isn’t without its pitfalls. One common mistake when getting a personal loan to build credit is borrowing more than you need to reach your credit goal. You might be approved for $2,500, for example, but that doesn’t mean you should take the full amount. Having a larger debt hanging over your head can lead to missed payments, which will give you the opposite of what you wanted – a lower credit score.
Instead, opt for a low loan amount. That way, you can easily pay off the loan, giving your credit score a big boost in the process. Keep your eye on the credit score prize, and don’t bite off more than you can chew.
Pay On Time
Here’s where the rubber really meets the road. Regular repayments are the number one thing you can do to affect your own credit score. Those credit-determining factors we mentioned earlier? Payment history is the biggest one, making up 35% of your overall score. It’s simple: when you make your payment on time every month, you’re doing your credit score a huge favor. With World Finance loans, you can even set up automated monthly payments to make sure you pay on time, every time.
Consider the Big Picture
A single personal loan may not be the only debt you have, which is pretty normal. If you have other monthly payments, that can be a very good thing. Another huge credit-building factor is credit mix, after all, meaning that having a diverse mix of credit – like a credit card, student loans, etc – reflects well on your overall credit score. If you pay on time, that is!
Whether you’re just starting your credit-building journey or looking for a second chance at good credit, a personal loan can offer a useful, manageable way to reach your credit goals.