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Using a personal loan to improve credit

Gadgetmang
Regular Contributor

Using a personal loan to improve credit

I just got a pre-approve personal loan letter from Creditshop for $2000, I really don't need $2000 for anything and considering accepting the loan just to pay it back right away. What do you guys think about that idea?


FICO 8 (TU) 780 FICO 8 (EQ) 782 Mar 2021
Message 1 of 6
5 REPLIES 5
CatOfSpades
Frequent Contributor

Re: Using a personal loan to improve credit

No! Smiley Surprised First rule of applying for any kind of credit - don't take on cards or loans or anything that you have no use for. It will not improve your credit. Time will improve your credit. Patience will improve your credit. Keeping utilization low. Paying on time. All will do more things for your credit than throwing on a loan that you don't need. Any "benefits" to your score from this won't be seen until the inquiry and new account ding fade away, and by then, taking care of your current accounts will have brought your score up anyway. 

 

No, no. Smiley Happy

♠Queen of Spades♠
Message 2 of 6
RonM21
Valued Contributor

Re: Using a personal loan to improve credit

There are people who get secured loans for the purpose of strengthening there scores because of a better credit mix. But it is always advised that you make sure you know what you are doing before getting into that.
                

TCL: $306,100Utiliz: 6%AAoA: 5yrs 2mOther: Lease, Loan, *No MortgageCollections-Lates-BK's: 0

LWS-35k | BOA-50k | AMX-32.4k | DISC-33.6k | ALNT-25k | NFCU-33k | BARC-15k | BBUY-12k | CSE-10k | CP1-10k | CITI-11.7k | PF-38.4k


Message 3 of 6
Gadgetmang
Regular Contributor

Re: Using a personal loan to improve credit


@CatOfSpades wrote:

No! Smiley Surprised First rule of applying for any kind of credit - don't take on cards or loans or anything that you have no use for. It will not improve your credit. Time will improve your credit. Patience will improve your credit. Keeping utilization low. Paying on time. All will do more things for your credit than throwing on a loan that you don't need. Any "benefits" to your score from this won't be seen until the inquiry and new account ding fade away, and by then, taking care of your current accounts will have brought your score up anyway. 

 

No, no. Smiley Happy


I see your point and make more sense to focus on things I actually need, thanks.


FICO 8 (TU) 780 FICO 8 (EQ) 782 Mar 2021
Message 4 of 6
SOGGIE
Valued Contributor

Re: Using a personal loan to improve credit


@RM21 wrote:
There are people who get secured loans for the purpose of strengthening there scores because of a better credit mix. But it is always advised that you make sure you know what you are doing before getting into that.

+1   There are plenty of unscrupulous payday loan sharks out there. OP if you are interested in seeking a loan for the purpose of strengthening your credit profile, be informed that many CU's will issue a share secured loan without accessing your credit record--as you are essentially borrowing from your own money. Many issuers report the secured loan as an installment account. Some report this as a secured installment, while others report is as just an installment. Some report to TU, EQ, and EX, while some only report to 1 or 2 bureaus. If this is something you are interested in, do your homework. Good luck!


Life was a lot simpler when what we honored was father and mother, rather than all major credit cards. ~Robert Orben

SCORES: Excellent · 830 to 848
INQUIRIES: 0
UNIVERSAL REVOLVERS: $200K Club
NUMBER OF CC ACCOUNTS: Less than 10
CARD USAGE: Minimal
CREDIT HISTORY: Very Lengthy · Seasoned Accounts
INCOME: Sufficient
UTIL: 1-2%
PYMTS: 100% Positive · Always PIF · AZEO
INSTALLMENTS: No thanks!
ASSETS: 100% Equity
TOTALLY REFUSE TO: Pay Interest or Annual Fees, Combine Accounts, Reduce Limits, Submit 4506-T, SCT, App Spree, Accumulate Inquiries, Do business with Comenity, Synchrony, Cap One, Wells Fargo, Citi, Barclays or any other credit-cancerous lending institutions
Message 5 of 6
takeshi74
Senior Contributor

Re: Using a personal loan to improve credit


@Gadgetmang wrote:

I just got a pre-approve personal loan letter from Creditshop for $2000, I really don't need $2000 for anything and considering accepting the loan just to pay it back right away. What do you guys think about that idea?


First off, consider the standard factors.  How do you expect this to improve your credit?

http://www.myfico.com/crediteducation/whatsinyourscore.aspx

 

Yes, an installment can help with Credit Mix if you don't have any installments.  However, the benefit is only there while the installment is active.  If you pay it back right away you'll lose that benefit when the installment is closed.

 

Consider that opening a new account will drop your AAoA (Length of Credit).

 

Consider that you will incur a hard pull.  The impact of a single hard pull is typically small but it can be larger for those with thin credit profiles and/or profiles with issues.

 

Consider that there is a potential negative impact while you have a new account on your reports.  Impact also varies depending on the strength of the credit profile.

 

 

Don't put the cart before the horse.  Sort out your financial needs and let them determine the products that you get.  Don't let score drive your decisions.  Certainly consider how actions will impact your credit but keep in mind that your overall financial health matters more.

Message 6 of 6
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