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Can Too Many Instalment Loans Hurt Your Credit Score?

by Emma A. Financial Writer
Undoubtedly, your credit score is the most important ingredient that is required to maintain your financial health. To gain control over your personal finances, you need to understand what factors affect your credit score and what helps them to improve. It is a common question asked by many people – do multiple instalment loans hurt the credit score? The answer is partly yes, and a part no. It depends on how you choose to deal with loan servicing. The way you manage your debts impact your credit score significantly.

How Multiple Instalment Loans Hurt Your Credit Score?

It’s a widely known fact that every time you apply for a loan, a few points are knocked off your credit score. Because when a lender conducts a hard credit check to assess your loan eligibility thoroughly, your credit score is impacted. And a hard credit check is mandatory by the financial regulator in the UK. It helps the lender to evaluate the borrower’s creditworthiness and on the basis of that, they make their decision.

So, if you apply for multiple Instalment Loans, your credit score will get a bit lower because of all the hard pulls. There are a few credit providers who conduct a soft credit check to offer the borrower initial quotes for their loan application. A soft credit check, commonly known as “soft pull” doesn’t leave any footprint on your credit report. And thus, it doesn’t impact your credit score. But before making their final offer and approval, the lenders have to carry out a hard pull, by law.

Moreover, your repayment patterns have a major impact on your credit score. If you do not make timely repayments against the loan taken out, your credit score will be damaged.

How Multiple Instalment Loans Boost Your Credit Score?

The only answer to this question is – timely repayments. If you repay all your loans on time and in full, your credit score will improve. But you need a solid financial management plan to repay multiple loans at a time. It becomes challenging to manage finances in order to repay the loan every month. Because these loans have to be repaid every month. If you are sure about the repayments, and you have a steady source of income to support the instalments, then you may opt for multiple instalment loans at a time.

Conclusion

It is not a good idea to apply for multiple loans at a time. If you have an ongoing debt, try to refrain from applying for a new one. This will complicate your situation and may drag you deeper into a debt spiral. At times of need, try asking your friends and family to lend you a monetary helping hand rather than adding new debts. You may consider taking out 6 month loans because they last only for six months. Once you repay the loan within the duration of six months, you may apply for a new one. But applying for multiple loans may create financial chaos in your life.

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About Emma A. Freshman   Financial Writer

8 connections, 0 recommendations, 32 honor points.
Joined APSense since, January 23rd, 2017, From London, United Kingdom.

Created on Jul 12th 2019 06:03. Viewed 473 times.

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