We have to wonder if installment loans will help improve our credit scores as we pay them on time, regularly over the months. The way to do that would be to borrow from a company who has a history of reporting to the three credit bureaus. If you have the desire to build your credit up, you want a lender who works with the agencies.
You also want to borrow an amount with your installment loans that you know will be manageable enough that you can pay the interest plus enough to get the balance to go down each month. This will develop a strong, positive payment history for you and look good to the lender as well as the credit agencies.
Looking at the other side of the coin, there are times when obtaining installment loans can hurt your credit score. If the lender does a hard inquiry when you go in for the loan, that can do a small amount of damage. Most lenders will share new installment loans accounts with all three of the credit bureaus. As you know, new accounts on your credit makes your score take a hit until you do develop that positive payment history we mentioned above.
Just like a good payment history can help the credit score, not paying can damage the credit score, and it will stay damaged by the nonpayment history for seven years. Sometimes folks use the money that they get with the installment loans to buy more debt. This, of course, will affect the credit score in a definite negative way.
You want to use installment loans to your favor with your credit score. They are a good way to build yourself back up with the credit agencies and develop some positive feedback on your credit report. Take advantage of a good thing.