Besides offering financial assistance when you need it urgently, personal loans offer several other benefits, including:
- Boosting your credit mix to improve your credit score:
Ten percent of your credit score comes from your “credit mix.” A credit mix refers to the different types of credit you have, including things like installment loans, credit cards, and financial accounts. Therefore, a personal loan can add to your credit mix, and potentially boost your credit score. Keep in mind, however, that applying for unnecessary loans just to improve your credit score isn’t a good idea.
- Prompt payment of loans can improve your credit score:
You can improve your credit history by developing a track record of prompt and full payment of your loan. This has the potential of improving your credit score.
- Long-term loans can boost your credit score:
The length of your credit history (the average age of your credit accounts) can impact your credit score. This factor applies from the date you open an account for currently active loans or lines of credit. Therefore, a long-term loan has the potential of positively impacting your credit score.