You probably know that a personal loan can help you make home improvements, enjoy a well-deserved vacation, cover unexpected expenses, and consolidate your debts under a single payment. What you may not know is that a personal loan could also help improve your credit score.
What is a credit score and how a banking institution uses it
The credit score is one of the key elements in a credit application. Banks use your credit score, among other factors, to determine how likely you are to pay a credit obligation. In other words, your score is among the criteria that a bank will use to evaluate your application and its possible approval.
Your credit score is calculated based on your credit history information on file with the three major credit reporting agencies: Equifax, Experian, and TransUnion. The credit score ranges from 300 to 850. The higher the number, the less risk you represent for the banking institution.
How a personal loan can help improve your credit score
Once you apply and are approved for a loan, being consistent in making your monthly payment could positively impact your credit score, since payment history accounts for approximately 35% in your score calculation.
Banks report your payment activity to the credit reporting agencies, so making all your payments on time will reflect on your history and show that you handle your debt responsibly.
Consolidating debts under a single payment can also have a positive impact on your score
Consolidating your debts into a single monthly payment can also help improve your credit score. According to a study presented by the credit agency TransUnion in 2019, 68% of consumers who applied for a loan to consolidate debts saw their credit score improve by more than 20 points.
he credit score increase happens because a consolidation loan reduces the credit utilization rate reported in your profile, which accounts for 30% when calculating your overall score.
Applying for a loan is easy
Depending on your needs, at Popular there are different personal loan options. Choose the loan that suits you and apply over the phone, at your nearest branch or online. If your application is eligible, you could get a response and the money that very same day.
If you want to learn more about our personal loans, click here or call TeleMarketing at 787.294.2572 or 1.888.724.3653, Monday through Friday from 8:00 a.m. to 7:00 p.m. and Saturdays from 8:00 a.m. to 5:00 p.m. You can also visit your nearest Popular branch for orientation.
Loans are subject to credit approval. Certain restrictions and conditions apply.
Equal Housing Lender.
The information contained herein was prepared for general information and educational purposes only and should not be construed as professional, tax, financial or legal advice or a legal opinion on specific facts or circumstances. Banco Popular de Puerto Rico, subsidiaries and/or affiliates are not engaged in rendering legal, accounting or tax advice. Please consult with your attorney, financial consultant/planner, accountant, and/or tax advisor for advice concerning your circumstances.