Personal Loans & Your Credit Score

Published on March 24th, 2020

Personal loans can provide a lifeline when unexpected expenses begin to complicate your life.  When “life happens,” people turn to personal loans to cover home repairs, medical bills, auto repairs, and more. Leyden Credit Union also offers personal loans near Elmwood Park for the bright moments in life as well—such as a wedding or quinceanera—because it’s equally important to celebrate when the opportunity rolls around. But how can these loans affect your credit score? We’ll explore the relationship between personal loans and building credit.

Credit Checks

There are two types of credit checks that can be initiated as part of the process of getting a personal loan:  a soft pull and a hard pull.  When you receive a solicitation for a loan or credit card, the lender has “pre-qualified” you via a “soft-pull” of your credit file.  You’ve received the solicitation because you fit the lender’s specifications of their preferred borrower.  A soft pull does not affect your credit score.  When you actively submit a loan application and are applying for credit, the financial institution is going to conduct a hard pull of your actual full credit report.  The hard pull can drop your score by a few points.

Making—and Missing—Payments

Paying your loan back on time will positively impact your score. Being able to demonstrate a long history of on-time payments is one of the best ways to improve your credit score. Conversely, allowing an unpaid bill to sit more than 30 days will result in negative reports to the credit bureaus and a significant drop to your score.

Debt Consolidation

If you choose to consolidate your debts into a personal loan, your credit score may be boosted by a more favorable credit utilization ratio (the amount of available credit you use). A personal loan—categorized as ‘installment credit’—can also add good variety to your credit history.

Personal Loans Near Elmwood Park

Sometimes, life comes at you fast! Leyden Credit Union offers ‘Life Happens’ Personal Loans near Elmwood Park. Whether you need the money for emergencies or to help celebrate a big moment in life, we may be able to help you. Get started.

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