When used responsibly, loans can actually help to improve your credit score. While the initial credit inquiry does cause the score to lower slightly, it is easy to rebound when you make on-time payments. It is ideal to maintain financial responsibility by only applying for a loan that you can repay even if one member of the household becomes unemployed.


Personal Installment Loans

Loan facilities and banks that extend personal loans to qualifying individuals report to credit bureaus. Making your payments on-time or early, this reflects positively on your credit report.  It helps your credit even more when you are able to pay more than the minimum balance due as it helps you pay the loan off faster. This makes a huge positive impact on your credit score as it shows financial responsibility.


Car Loans

Car loans have interest and long terms attached to the loan agreement. The interest varies depending upon your existing credit score. Even those with less than perfect credit can get a car loan. When the payments are made timely, this helps improve your credit score. Offers for refinancing the loan to reduce the payment and interest often becomes an option that should be considered as it can put more money back into the financial budget of the household.



When searching for a home to buy, keep the price in mind. This will determine your mortgage payment in combination with your down payment, terms selected and interest rate assigned to the installment loan. This is a large purchase that takes from 8 to 30 years to pay off. Make sure that the payment can be afforded by a single income and make all of the payments on time. This is another instance where paying off the balance early actually benefits your credit score by leaps and bounds.

Consider purchasing a home with a 20-year term and make it a goal to pay it off in 8 years or less. This doesn’t always boost your credit but will save you a lot of money on interest fees.


Revolving Credit Accounts

Some revolving credit accounts are good for helping to improve credit scores. When you have bad credit to start with, a creditor may take a risk on you depending what types of items are on the report. Use these to build your credit. Make the on-time payments, pay more than the minimum balance and ask about refinancing for a lower interest after the 6-month mark as a cardholder. Continue making on-time payments and work on refinancing until you can get your score up high enough for a traditional credit card account. Many consumers do not consider a credit card as a loan; however, revolving credit is just a type of re-occurring balance loan.

In today’s day and age bad credit can do more than prevent you from buying a house or car. It can prevent you from getting a great job. Many employers now require potential employees to submit to a background check as part of the onboarding process. To an employer, a good credit score means that you are a responsible person.  Keep this in mind as you move forward with loans throughout adulthood.