How will a Personal Loan affect my credit score?
A personal loan will show on your credit report and be listed simply as an unsecured closed-end loan. This loan will not affect your credit score any differently than opening up a secured loan for the same amount and term (i.e. a car loan).
If you open a personal loan as a form of debt consolidation, there are a few steps to be aware of that may affect your score. Closing all credit cards at one time may bring your credit score down. Two things that affect a person’s credit are the available amount of credit and the age of the oldest credit account established. If these credit lines were to be closed to zero all at once, your credit score might go down. If possible, it would be best to gradually close the cards in order from newest line of credit to the oldest line of credit.
Keeping the oldest line of credit open, even with a zero balance, shows creditors that you have been responsibly managing this credit line for several years. This will help maintain or even increase your credit score.
Ultimately, opening a personal loan will not affect your credit score any different than any other type of loan. In fact, if you are just establishing credit a small unsecured loanis often used as a starter loan for people with no credit. This could help raise your credit score while you make monthly payments and even once the loan is paid off.
Other Common Personal Loan Questions
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