How Does A Personal Loan Affect Your Credit Score?

The old saying, “Cash is king” just isn’t true in today’s world. Nowadays, credit is king, and how you decide to use your opportunities in the world of credit will directly impact how well you rule your personal kingdom. There are specific practices that must be followed in order to ensure your credit score is constantly improving, and personal loans are one of the simplest and most effective ways to improve your credit while also improving your life.

How will this loan affect my future?

The first question you need to ask yourself when it comes to applying for a personal loan is: How will this loan affect my future? The most immediate impact on receiving a personal loan is the cash that you receive from the lender. This money may go to paying bills, purchasing something for your home or family, or simply giving you the freedom to spend money that you previously did not have available, whether that is for day to day needs, or a well-deserved vacation.

How will this loan affect my credit score

The next question you need to ask yourself when it comes to applying for and accepting a personal loan is: How will this loan affect my credit score? There is much misinformation when it comes to applying for and accepting loans as it pertains to credit scores. Some people believe that each time you apply for a loan and your credit score is pulled through one or more of the major credit bureaus, that your credit score will be lowered. Unless you are applying for an excessive number of loans at once, your credit score is not significantly affected by a simple loan application.

Important Factors

Overall, a personal loan will have a positive impact on your credit score. The most important factors to keep in mind is the amount of the loan, the length or the term of the loan, and making sure that you are keeping up on making timely payments on the loan. Nothing improves your credit score more than keeping an active credit profile (which means consistently having active loans) and making your monthly payments on time.

Credit scores increase as loans are paid on time, and eventually, in full. Going too long without having personal loans, credit cards or auto loans actually affects your credit in a negative way. Some retired individuals have trouble receiving loans because they have gone too long without being active in the world of credit. Senior citizens with a paid off house and paid off automobile often find it difficult to receive loans because they have not been on the radar of the credit bureaus for a number of years.

The best way to keep your credit score moving in a positive direction is to take on loans that you can afford, make your monthly payments in a timely manner, and stay consistent with your loans until they are paid in full. By applying for a loan that fits your budget and meets your needs, and by making timely payments on these loans, you will find that not only will your quality of life increase, but so will your credit score.

Contact Citizens Financial Services

If you need a personal loan, you may want to one of our friendly staff members at Citizens Financial Services. We offer loans which can allow you to spread the cost of an emergency or a large purchase over time. To learn more, contact us or start the application process online.