Credit scores can seem mysterious at times. There are so many factors that can affect them, and it can be hard to figure out what you should do to improve your score. If you’ve been searching for a bad credit loan, you might be wondering if it is going to help or hurt your score. Allow us to explain, and we’ll cover some other things you can do to help your credit score in the long run.
Positive Reports Raise Your Score
To put it very simply, when reporting lenders you’ve borrowed money from, whether it’s in the form of a credit card, a mortgage, car loan, or a bad credit loan, tell the credit reporting agencies that you’ve made your payments in full and on time, it helps your score. Those lenders are required to report the truth to the reporting agencies, whether it’s good or bad. A lot of other factors play into how much it helps your score when you make a payment on time, but rest assured that every on-time payment to a reporting lender means good things for your credit score.
This means that, even if the loan you took out was a bad credit loan with monthly payments, it still has the potential to increase your credit score so long as you abide by the terms or repayment.
Understanding Who Reports to Credit Agencies
Lenders are not required to report to the major credit bureaus. However, most major banks report so most loans you get or credit cards you apply for will show up on your report, regardless of the credit requirements for the account. This means that even most instant loans for bad credit will report, and as long as you pay on time, that’s a good thing.
There’s a lot of incentive for lenders to report to the major credit bureaus, despite that they don’t actually have to. This is because lenders count on having an accurate picture of a potential loan candidate’s credit history and no lender can get that if other lenders don’t report. All lenders are required to report accurately if they are reporting, though, so if you see anything off on your credit report, be sure to address it as soon as possible.
If you’re curious about this or it’s important to you, be sure to ask potential creditors before you apply for their bad credit loan whether they report or not.
How You Can Improve Your Credit Score
When your credit score is bad, improving it can seem like quite a feat. However, there are several things you can do to work on your credit score, including taking out an instant loan for bad credit if that’s one of the only options available to you.
Don’t Be Discouraged by a Bad Credit Score
A bad credit score can be disheartening, and it can stand in the way of your goals for the future. However, it’s important to remember that it’s not permanent. By making a concentrated effort towards making sure nothing negative is reported to the credit agencies, you can help stop the bleeding and keep your score from falling. By giving your lenders positive things to report, you can work towards slowly building your score up.
You might also be surprised at the terms you can get for different types of loans like bad credit loans. Many companies are willing to give those with low credit scores a second chance.
You May Need to Borrow to Raise Your Score
In order to have a good credit score, you need what are often referred to as ‘positive tradelines’. A positive tradeline is basically just a credit account for which you’ve followed the terms laid out. You’ve paid your payments on time and in full, giving the company nothing but good things to report to the credit bureaus.
You can get positive tradelines by either opening a new credit card account or taking out a loan and being sure to make the monthly payment on time. It’s important to note that loans and credit cards count as two different types of credit. A bad credit loan with monthly payments will appear in an entirely different section of your credit report from a store credit card.
Don’t Borrow More Than You Can Afford
One of the best ways to make sure that your current accounts and any new accounts you open remain positive tradelines is to only borrow what you can afford to pay back. Ideally, your monthly income is able to cover all of your monthly expenses, including credit card or bad credit loan payments, plus a little extra to put into savings in case of an emergency.
Monitor Your Score
One of the most important things you can do to work on your credit score is to check it. First off, this will allow you to make sure that everything being reported on your credit report is accurate. Next, seeing a steadily rising score is great motivation to keep working hard towards a more positive credit history. You’ll also be able to determine what kind credit offers you might be eligible for. You may think your credit score will only qualify you for a bad credit loan, but you never know until you actually check. You may also consider figuring your debt to income ratio as it can also play a big role in your potential to snag a loan.
Watch Your Credit Utilization Rate
Your credit utilization rate is one way that your credit score can fluctuate a lot in a very short period of time, especially if your credit lines are fairly small. Your credit utilization rate is essentially what you owe on your credit cards compared to your credit card limits. When you keep balances on your credit cards, you are utilizing credit. When you’ve charged close to your credit card limits, your credit utilization rate is high. You want to keep this ratio low to maintain your best possible score.
Finding New Opportunities to Build Credit
If you need help finding new positive tradelines that have the most favorable terms possible for your less-than-stellar credit, be sure to check out the credit card offers on Loans Now. We’ve rounded up a couple of the best offers out there for those looking to build their credit with a new positive tradeline.