How more debt can improve a credit score
It may seem counterintuitive that taking on debt can increase your credit score. In truth, it’s one of the best ways to do so. Alas, getting a loan with a low credit score is often difficult, depending on where you apply.
Perhaps you just haven’t established credit yet, good or bad. It’s frustrating when someone won’t give you a loan simply because you’ve never had a loan before.
I mean, you’ve got to start somewhere, right?
Sometimes a low credit score triggers a red flag that you won’t repay your loan on time.
That’s not always fair. At the Ashland Community Credit Union, we believe that sometimes bad things happen to good people. We just need to work hard to turn it around. We like to hear your stories and understand your situation. We like to say “yes” to your loan requests because we believe in people first.
So it’s important where you apply, and it is important that you do.
Here is why having a loan can improve a credit score, and why you should consider seeking loan approval:
Show you can make on-time Payments:
Whether you’ve never done it, or hit a rough patch in the past, making timely payments should work to show you can manage credit responsibly, and improve your low credit score.
Show you can handle different kinds of credit
A credit card often isn’t enough. Multiple credit cards often aren’t enough. A loan from a financial institution shows credit diversity, and that’s a good sign for lenders.
Show reduced dependence on credit cards
Here is where a debt consolidation loan can help. If your credit cards are maxed out or close to their limits, taking out a loan to pay down credit card balances can help your credit score.
While you are looking to rebuild your credit score by taking on debt, be on the lookout for some common traps.
Watch out for high-interest Rates:
Click here to view our lower loan rates first.
Watch out for longer Loan Terms:
Find someone you can trust to help you make wise decisions. We’re always happy to talk.
Watch out for too many credit inquiries:
Like we said, “We want to give you a loan unless you can talk us out of it”. So, you may as well start here.
The bottom line is that you have options to gain a better credit history report. Don’t shy away from taking on more debt to improve your debt situation. Choose your lender wisely, and make smart decisions. The rest, including your credit score, should take care of itself.
