Having a good credit score is a key factor of your financial health to lenders when applying for a personal loan. The better your credit score, the more access you have to better personal loan deals, such as lower interest rates. Four keys that play a part in your credit score:
Two of these factors, credit utilization and age of credit, are especially important when looking into the best option for you to receive a personal loan.
Debt you carry matters, and debt is divided up into two different categories when it comes to your credit report, revolving loans and installment loans.
Your credit score is affected by the ratio of outstanding balances to available credit on revolving accounts. This ratio is called credit utilization. As your balances on revolving accounts go up, your credit scores goes down because the balances are getting close to their limits. When this happens, your credit utilization is too high and indicates to lenders an inability to meet debt repayment.
Replacing credit card debt with a personal loan can help if you can qualify for a lower interest rate. The same amount of debt on a personal loan may not be as detrimental to your credit score as a revolving loan that is getting close to its limit.
So, if your credit score is low and you have multiple credit cards with balances, consolidating those debts and taking out a personal loan to pay one debt will improve your credit score.
Peach Capital Funding is here to provide you with credit score tips so that you can achieve having a good credit score and have no issues with receive a low rate personal loan when you apply for a loan.