There are not too many things that carry as much weight in your adult life as your credit score. It may impact everything from a major purchase to whether or not you are able to purchase auto insurance. Fortunately, if you have had a few dings to your credit score, they can be fixed, and one of the ways you can do this is through the use of a personal loan. Here are a few ways that this can be accomplished.
A Personal Loan Can Help You To Consolidate Your Debt
A personal loan, signature loan, or an unsecured loan is money that you are able to borrow without putting any collateral down. This type of money can be a great way to consolidate other outstanding debt that you may have. Not only does consolidating your debt allow you to have all of your debt in one place, it usually will reduce your required payment amount, providing you with more available income.
A personal consolidation loan can be a real benefit and will boost your credit score, especially if you have other types of unsecured debt that are at high interest rates. A consolidation loan can help you to reduce these interest rates.
A consolidation loan can also help you to save money, especially if you have been making late payments due to the fact that you are overextended. By making the payments of your consolidated debt on time, you will no longer incur late payment fees, and these accounts won't report that you are paying late. You will see an increase in your credit score and pay off your debt faster. In addition to this, you will see a boost in your credit score due to the other accounts showing up as being paid in full.
A Personal Loan Can Improve Your Credit Utilization
Two of the things that your FICO score considers are:
By taking out a personal loan and paying off some of your open accounts, you will reduce or eliminate the balance that you have on these accounts. If you leave these accounts open, and are able to resist adding new debt back onto them, the zero balances of these accounts will show that you are utilizing less than 30% of your available credit, which could lead to an increase in your credit score.
If you choose to close some of these accounts, ensure that you do it strategically, because it could actually hurt your credit score by reducing the overall amount of credit that you have available. However, when choosing the cards that you may be considering closing, choose those that charge an annual fee first. Keeping them open will cost you money even if you are not planning to use them. Make sure that you receive confirmation from the company that the account has been closed, and keep this in your files until this information is reflected on your credit report.
Personal Loans Can Provide You With A Mix Of Credit
Your credit score also takes into consideration all of the different types of credit that are reflected on your credit report. This mix accounts for 10% of your credit score and may be made up of the following:
While you definitely do not want to search out new credit just to have more credit in your mix, having and successfully managing different types of credit, including a personal loan, can give your score a boost.
Speak with your local bank, credit union, or lending institution to see how you can qualify for a personal loan. It may be one of the best decision you make, and it could lead to you improving your credit score.
Share20 July 2016
When I started thinking about my life, I realized that I was spending a lot more money than I should be every month on little extras. I wanted to streamline things, so I decided to start focusing on getting my finances in order. I started looking around my house, and I was pleased to discover that there were more than a few things I could sell for a little extra cash. I put them online, and I was amazed to see how quickly they sold. After selling some things, I was able to get my finances in order, which was a huge relief. This blog is all about getting your finances in order.