A majority of loan seekers are interested in knowing whether the online installment loans can leave a negative impact on their credit score. Many of the industry experts are of the opinion that these loans are indeed a rare means of improving your credit score.
However, an applicant needs to check out a few important things prior to applying for these online installment loans.
Is it really beneficial to use an Installment Loan?
You must understand how an installment can actually help you build credit. This, in turn, will help you to apply for an online installment loan at the right time.
Few scenarios wherein you may apply for an installment loan to build your credit score:
- Building your credit score with the help of an installment loan is certainly a possibility when you don’t owe any borrowed amount that affects your credit score negatively. The saying also goes true when you already have an old installment loan to fend for. Opt for one when you’re currently under no financial obligations.
- Your credit score is likely to be raised when you’ve just paid off an installment loan. This is more likely to prove you attractive in the eyes of lenders, especially while applying for loans in the future.
- If you’re checking out the prospect of buying a new home, then you ought to maintain a FICO score over 640; this is truly effective when you have a traditional mortgage in mind. An installment is really helpful when you need to prove your borrowing confidence to your lender and demand that extra boost. Experiencing debt and then pulling it off over time will prove you more trustworthy in the eyes of a bank.
- You may be charged with a much higher interest rate or you may even find it tough to obtain any loan when you have some closed installment loans without any credit check or when an outstanding is still open with negative remarks e.g. written off by collection agencies, reflect delinquencies, or record late payments. These issues need to be fixed as early as possible by getting in touch with your creditors, paying off dues, and pointing towards discrepancies. These are a few key steps that can actually improve your account and create opportunities for you to obtain fresh loans. Make sure your payment record remains positive under all circumstances.
You may as well consider a few scenarios wherein your credit score won’t improve even when you obtain an installment loan. You may assume a scenario wherein your credit record depicts a timely payment history against any open installment loan. This way, you’re already utilizing the advantage of your installment loan and so you must avoid applying for more of such loans.
Out of all factors that leave a strong impact on your credit score, your payment history is an important one; it considers your FICO score for determining your credit score. You must opt for an installment loan only when you need to pull yourself out of a financial crisis. If you apply for a loan when you don’t need it, your credit score may be lowered and the debt that you owe may be increased.