Payment history accounts for 35% of your overall credit score. This means that on-time loan payments will go towards improving your scores. Payments report monthly to the major credit bureaus. If you don’t have a great history of on-time payments, it just might help to start fresh!
2. How personal loans work
A personal loan is an installment loan. With an installment loan you receive a specific amount from the lender. You repay that amount, along with interest with a set monthly payment amount over a period of time. On-time payments can have a positive effect on your scores.
3. Personal Loan vs. Payday Loan
Payday loans come with extremely high interest rates. They are designed to be difficult to repay often causing borrowers to “roll” the loan over, adding new fees. Personal loans generally have lower interest rates in addition to repayment terms that extend on average 36 months.
4. Loan Application Process
With online loans you can get approved today and receive money in your account as soon as the next business day. Simply choose a loan offer then fill out a short online form to see what you may qualify for. Applying online will not affect your credit scores.
5. Borrowers Benefit
Traditional bank loans can be cumbersome for borrowers, especially borrowers with bad credit. With online lenders you bypass the banks plus borrowers encounter an easy online application, flexible repayment terms, no prepayment penalties and no hidden fees.
6. Diversify your credit history
A diverse mix of credit can help your scores. The FICO scoring system considers 5 major factors. “Credit Mix” is 10% of your score. A good mix of credit would be: credit cards, personal, student and mortgage loan debt. The more diverse your credit mix, the better your credit scores.