People who are attempting to improve their credit score often use installment loans. When you pay off an installment loan you are able to do it over a period of months or even years if this is necessary. Making those monthly payments when they are due helps your credit score because whenever you pay a bill on time your lender notifies the credit reporting bureaus of it. When the installment loan has been paid off in full your credit score is usually higher than it was when you took out the loan. So, in this article we are going to go into details as to how installment loans can improve your credit score.
Types of Installment Loans
Installment loans are typically either mortgages or car loans. Since this amount is usually in the thousands, paying off these loans in increments lets lenders know that you are reliable when it comes to making timely and regular payments. Paying off any installment loan gets the loan account closed and the more accounts you can pay off and closed the better for your credit. Some people think it is a good idea to pay off an installment loan early, but that is not always the case. Many companies that offer car loans come with a penalty to anyone who pays them off early. The same rule does not apply to paying off a mortgage.
Installment Loans Are Less Risky
When it comes to improving your credit score installment loans are often better options than a revolving line of credit. Part of your credit score is determined via credit utilization. If you have a few different kinds of credit available to you and one of them is an installment loan this will automatically boost your credit score. Utilizing more than one type of credit is ultimately good for you.
Easier Budgeting of Money
Budgeting your money is much easier to do when you use installment loans and the easier it is to budget your money the more of it you will have in which to improve your credit score with. This prevents you from having unexpected expenses because you will know the exact amount you have to pay, which will stay the same every month until you have paid it off.
Tips For Getting The Best Installment Loans
Finding the best installment loans possible does not have to be a hard task. Your best bet is to start searching for these loans on the Internet. Once you have narrowed down the possibilities you will want to look at each one closely. Look at whether or not a particular loan is unsecured or secured. Unsecured loans are generally easier to deal with than secured loans. When you apply for a secured loan you usually have to put up collateral such as your house or your car. While unsecured loans don’t require you to put up collateral the loan company will use your income level to determine whether or not you qualify for the loan. Lenders avoid unsecured loans because they are so risky for the companies.
Acquiring an installment loan can be one of the easiest ways to improve your credit score and give you more buying power.Installment Loans - 6 Dec, 2013 - No Comments