Increase Credit Score by Borrowing Money
Increase Credit Score by Borrowing Money
The majority of borrowers usually think that they can increase their credit score by paying off their debt or getting rid of their loans and credit cards. While paying off your debt is a good practice, the latter is not.
Without a doubt, paying off your debt improves your credit score. Lenders want to make sure that your debt-to-income ratio is low and they do not prefer maxed-out credit cards.
Lenders decide whether or not to give you a loan by considering your ability to fully pay the principal plus interest on time. To do this, they check your credit report since it reflects how you have previously managed loans.
Although you have a debt, you must handle it responsibly so that you can have a good credit report and a high credit score. First, you must be aware of the two types of loans. The first type is an installment loan and the second type is a revolving loan.
An installment loan is a loan that is given to you for only once and you pay it back a later time. After paying off the loan, you cannot avail of it again. For instance, auto and mortgage loan are installment loans.
On the other hand, a revolving loan is a loan that can be availed for a number of times, for instance, a credit card. You can borrow money up to a certain credit limit, pay it off, and borrow once again. For instance, your credit card is a revolving loan.
The second thing to be aware of is that lenders prefer that you have both types of loans in your credit report because it shows your responsibility in borrowing money and your ability to handle debt.
Therefore, in order to keep a high credit score, you must borrow money and pay them back responsibly, particularly, on time and in full.
Related posts on loans for people with bad credit:
- 5 Tips on How to Increase Credit Score 5 Tips on How to Increase Credit Score Life would be much easier if you have a good credit score. However, it would be very difficult if you have poor credit score. So, here are five tips that might help if…...
- Five Steps on How to Keep a Good Credit Score Five Steps on How to Keep a Good Credit Score One of the advantages of having a good credit score is that you can get good rate on a mortgage or any other type of loan. However, lending firms are not the…...
- 3 Easy Ways To Increase Your Credit Score It used to be that "people" made decisions about your credit worthiness. You knew your banker and your handshake was all the collateral you needed. Those days are long gone, and now a single number - your FICO score - determines your credit worthiness....
- Factors That Affect Credit Score, How to Improve It Factors That Affect Credit Score, How to Improve It If you are planning to purchase something and your interest rates matter, then knowing your credit score is very important. If you have good credit score, then you might be charged a…...
- How a Catalogue with Instant Credit Help Boost You Credit Score How a Catalogue with Instant Credit Help Boost You Credit Score Catalogues with instant credit may help increase your credit rating. To find out how they can give your credit history a boost, you should know how it’s calculated. Your credit score…...
Filed under: line of credit • Loans
Like this post? Subscribe to my RSS feed and get loads more!