Can Loans Improve Credit Score?
A credit score represents an individual’s creditworthiness. Lenders use credit scores to see if an individual can qualify for a loan so it is important to know what affects a credit score.
Loans can improve credit score, in one of a few ways.
- Loans builds a Credit Report: Getting a personal loan and taking on debt gives you the opportunity to create a steady credit history by making regular payments to the loan. Creating this consistent report will show your dependability and prove to creditors that you are not a risk to lend to.
- Debt consolidation Loans: Having your debt simplified into one more manageable loan will be able to help improve your credit score as you will have fewer payments to manage. Meaning it will be easier to make regular payments. Additionally, having your finances paid off from the other providers (i.e. other lenders or credit cards) will make you appear more serviceable and reliable with your finances.
- Utilisation ratio: This is the ratio of your credit limit vs the amount of credit in use. If you max out all your credit cards, then your ratio would be poor as it shows you may find it difficult to use credit responsibly. Getting a personal loan instead of maxing out your available credit or even to pay off some of it, will increase this ratio and in return improve your credit score.
So if you are looking for a way to improve your credit score and need a loan talk to your team at NZCU South today about a personal loan.