People with bad credit should make a priority out of improving their credit score. Can small installment loans help you achieve that? The truth is that while small online installment loans will help you a bit and improve your credit score, the difference will be small and, in some cases, it will not affect the score at all.
These loans we have mentioned earlier are generally mortgage or auto loans, where the borrower has to pay a monthly fee, which is known as an installment, for a specific number of months. In such cases, people often loan thousands of dollars and they do that by securing their house or their vehicle. The main reason why these loans dont help people improve their credit score is because credit cards are paid after the loan. If you were to compare the balance remaining to the amount of the loan, you would notice that reducing the amount you own is a process that takes years.
Once you have finished paying your monthly installments, the account you opened for this loan is considered closed and will appear as such on your credit report as well. If you have an account opened and you pay your debt on time, this has more value on your credit report than an account which is now closed and part of your credit history. There are 2 main factors that will affect your credit score when you have small installment loans to pay. First of all, it matters how many times you’ve been late with your payments. Second, it is important how many days or months you’ve been late. Know that in most cases, it’s useless for you to try and pay your installments earlier. In some cases, early payments can save you some money as far as interest charges are concerned.