Credit is an integral aspect of having a well-rounded, healthy financial life. Without access to affordable credit via loans, credit cards, and other financing solutions, it can be difficult for people to achieve the goals they have for their life. Understanding how credit works helps in creating a strong credit profile, but there are many aspects involved in calculating one’s credit score that need to be recognised.
One of the ways consumers make mistakes in their credit journey is being unaware of how specific types of credit accounts impact their credit score calculation. Loans are common tools in financing major expenses, whether they are known or unexpected. This is because a loan comes with a predictable repayment term and set monthly payments, as well as a set cost by way of an interest rate charged on the amount borrowed. Many lenders offer loans to consumers through in-person locations or online platforms, making it easy to get a loan when it is needed. However, the ease and convenience of loans often overshadow the credit consequences that they entail. Consumers considering a loan for any reason can lessen the blow to credit scores by understanding the following mistakes – and how to avoid them.
Avoid Applying for Multiple Loans
Over the last decade, a multitude of lenders have joined the ranks of banks and credit unions offering loans directly to borrowers. The rapid influx of loan providers has made it easier for consumers to get access to the financing they need, when they need it; however, the increased competition has also created inadvertent negative impacts to credit scores.Continue Reading