How do personal loans affect credit score?

[Soundersfan1]

So I am wondering how a personal loan would affect my credit score. I'm pretty familiar on the credit card side but not so on the personal loan side. Is debt to income ratio based on monthly payments? How does the total balance left on the loan affect my credit score? 

[Thomas_Thumb]

Debt to income is not a factor in Fico or VantageScore credit scores. Of course, it is a consideration in a loan review process. Debt is based on monthly payment obligations when calculating DTI ratio.

Fico does consider aggregate B/L of active loans in scoring. The Fico credit mix metric wants to see a loan on file (open or closed). Having an open installment loan can boost score in Fico 8 and later models which look for recent activity. Lastly, Fico looks at length of installment payment history and presence of lates.

[FICOdawg]

As mentioned above, debt to income isn't a direct FICO factor but the % balance remaining is.    I recently got 7 points back when my 7 months old car loan hit 89% balance.

You also get some points by simply having one installment loan.

The biggest knobs are perfect payment history and low revolving CC utilisation (<6%) and age of credit.

[Realist]

If you understand that your FICO score is an introductory score saying "Hello, may I do business with you", then it makes more sense.  It's like meeting with HR, before you get a job.  The real test is what lies below.  Will the hiring manager like what you are offering?

It doesn't matter if your score is 600, 700, or 800, that's simply going to generate where abouts your lending percentage rate is going to be - if you are accepted.  I've walked this path with individuals, our worst in particular, started with 520 and ended up with an 780, excellent FICO score, but three out of four lenders decided not to do business with them.   Why not?   It was the history.  The one in four that did, made sure to make up for it with a high interest rate, until their future history had been satisfactorily established.

A FICO score can be manipulated, and give off an incorrect picture of financial responsibilty.  But it doesn't have to be that way forever.  Fortunately.

The answer to your question is a healthy credit profile.  A healthy credit profile will generate a healthy FICO score.  For those coming out of the gate at 18, they can generate a very healthy score, and profile quickly if they do all things right, and are lead right.  But, for those that have misteps along the way, it's a small road to recovery.  Sometimes more-so.

Building out a healhty profile requires fortitude.  Lenders want to see how diverse you are in handling debt.  Not just revolving credit, everyone does that.  You aren't special if you only hold revolving credit, that's a minimal standard.  Do or did you have a car loan?  Do our did you have a Home loan?  Do or did you have an energy efficient loan?  Do or did you have a personal loan?  Do or did you hold a student loan?  Have they all be successfully paid on and paid off?  etc, etc, etc.  They want to see a well diversifed candidate that can handle EVERY kind of debt tossed at them, ideally.  The more you have to show for it, the greater that profile.  I hold 45 or so accounts spanning that and much more I havent' listed here, so a lender would never, ever doubt that they would never not get paid.  Most likely anyways.

Your FICO score, that's just the icing towards "should we lend to you".  Are you a sound borrower?

My advice as always, is to take every term loan that reasonably makes sense for your livelihood - including personal loans.  I've had some myself for strategic reasons.  The revolving lines are simply there.  You are building out a credit profile over a lifetime, not over a course of a few years, but rather a life time.  That lifetime, is your strength, and ultimate value on a credit scoreboard.