Fix Your Credit Score

Need help fixing your credit?

If you are just starting out or have a thin credit history, your score may sit in the poor to fair range. That score can affect loan rates, rental applications and more, so it is worth taking steps to improve it.

A personal loan used carefully can help, but it is not the only way and it is not risk free. A missed payment can do more harm than the loan does good.

How a personal loan can affect your credit

It can reduce your credit utilization

If you use an installment loan to pay off credit cards, you lower the share of your card limits in use. Installment balances generally do not count toward that ratio, because they have a fixed payment plan.

It can create positive payment history

If your lender reports to the credit bureaus, on-time payments add to your history. Ask whether a lender reports before you count on this, because many do not.

It can diversify your credit mix

Having both revolving credit, like cards, and installment credit, like loans, shows that you can manage different types of debt.

Do’s and don’ts to fix credit scores

• Only borrow what you need. A bigger loan means bigger payments and more risk.
• Keep paying down your debts. Do not run cards back up after you consolidate them.
• Create a budget. Know what you can pay every month before you take on a loan.
• Do not miss payments. Payment history is usually the largest part of a score.
• Check your reports. Get them free at annualcreditreport.com and dispute any errors with the credit bureaus.

Our guides on improving your credit score and fixing your credit go into more detail.