3 Genius Ways Through Which an Installment Loan Improves Your Credit Score
Most people out there get panic stricken when they have a bad credit score. However, you should not let this fear haunt you because there is always a way out. The moment you feel that your score is beyond your control, then this calls for some adjustment in your thinking process.
Do you know that if you opt for a personal installment loan, then you do stand a chance to improving your FICO score? The way an installment loan works is that you have to make a series of payments over the course of your loan’s term.
How Instalment Loan Improves Your Credit Score
Helps in diversifying your credit
When FICO creates your credit score, then it sorts your information into five different categories. Two sections hold the most importance. They are as follows:
- Amount Owed
- Payment History
The amount owed contributes to about 30% of your score, and the payment history contributes to about 35% of your score. The credit mix contributes to about 10% of your score.
The credit mix consists of different loans. This includes student debt, auto debt, and personal debt.
When you have a lot of credit card debt, then it is a smart idea to opt for an installment loan. The reason is that installment loan can help to diversify your credit.
Brings a significant improvement in your payment history
As mentioned earlier payment history has a major impact on your score.This is why when you will make your installment payments on time, then your score will start to improve automatically.
If you did not have a good payment history in the past, then it will be a good idea to start fresh. However, you need to be on your guard against lenders who do not report the payment information.
If this happens, all your efforts will go in vague. It will be a good idea to talk out things with your lender. When you have a good payment history, the lender should willingly add the information in your reports so that you can benefit from this practice.
Helps you save money
When you want to improve your credit score, then it is important that you should owe less debt. The best way to achieve low debt is to get hold of low-interest rate. This way your debt will come down.
Going for an installment loan can surely help to achieve this objective but keep one important thing in mind.
If you cannot get an interest rate lower or equal to your debt, then the installment loan will not help. When you consolidate high-interest debt with a reliable installment plan, then this can help to save money.
Get in touch with a reputed credit repair service if you are confused how an installment loan can improve your score. Make sure that you first check the credit repair reviews of the service you are about to hire.
This way you can get hold of reliable assistance coming your way.