How Installment Loans Can Boost Your Credit Score

Installment loans can improve your credit score.

Yes, you read it right.

You take in debt and get better credit.


Keep reading, and we’ll tell you.

Personal Loans for Bad Credit

The beauty of installment loans is their on-time characteristic. You’ll have to pay this amount punctually over the next few months in what’s called a set repayment term.

For example, if you take out a $15,000-loan, the lender or lending institution stipulates how much the monthly installment will cost and how long the loan will last, depending on your payment capability.

Your FICO® Score☉ – AKA credit score – is dependent on your payment history since it composes 35 percent of the total number. Personal loans for bad credit allow you to make punctual repayments every month. Doing so improves your score altogether!

The bad news is that late payments do the opposite, so avoid missing even one payment or even paying a month or more late. If you have an automatic banking system, set it to debit the installment amount automatically, so you’re sure never to miss and maintain a high credit score.

Personal loans for bad credit also boost your credit portfolio or credit mix. FICO®’s scoring algorithm prefers a combination of installment and revolving credit (via credit cards) to weigh in on a person’s creditworthiness. Paying on time lifts your credit rating.

However, when compared to payment history, credit mix accounts for only 10 percent of your total rating. If you’re having difficulty being punctual with your payments, it’s better to focus on that than taking in an installment loan or revolving credit. Focus on paying punctually first.

Other Ways to Improve Credit Scores

Aside from installment loans, you can positively impact your credit rating through revolving credit. As mentioned earlier, if you don’t have personal loans for bad credit, but you use a credit card more often, that will do!

The trick here is to stick to your credit limit with credit cards. This is slightly behind paying on time but is also essential. Basically, the lower your spending limit per month or cut-off, the lower your risk to creditors, and the more likely they’ll lend you cash.

Pay the entire amount, not the bare minimum, when paying revolving credit punctually. Take into account the compounding interest rate when you do so. While you may have a smaller amount to pay, your interest will keep increasing and keep you locked in debt longer. This behavior signals creditors you are incapable of sticking to a financial agreement and prefer staying in debt than getting out of it, thereby lowering your credit score.

However, if you use less than 30 percent of your credit limit, that means a lower amount to pay, making it easier for you to pay and remit that amount on time. This positively impacts your credit rating since you not only can pay punctually, but you pay exactly what you owe and signal creditors that you are responsible when dealing with debt!

Another convenient way of raising your credit is by giving creditors access to your online payment history. For example, if you pay for bills, groceries, and entertainment through your bank, send them a soft copy of your payment history as an additional document for your credit report. Not only does it show proof you can pay for those expenses independently from borrowing, but that you pay them punctually as well.


Personal loans for bad credit must be taken responsibly to boost one’s rating. It is a tool that could prove to creditors and lenders you are good for the cash requested through on-time, total payments of the monthly arrangement.

If your debt-to-income ratio cannot accommodate a new loan or you currently have revolving credit to pay off, remember to pay credit card bills punctually and fully since those also improve your credit score.

However, if you’re capable and dead set on taking ,personal loans for bad credit, contact Stones River right now! We’re an installment loan company in Murfreesboro, TN, offering installment packages paid over time to help our clients achieve their financial dreams.