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On Using Personal Loans To Bring Your Credit Score Up

By Sally Maison
Published: Monday, March 15th, 2010

Like most American consumers, you probably got hit hard when the economic recession hit. The drop in employment may have hit you hard too and, if you were one of the unlucky ones, you might have gotten laid off as well. The lack of reliable cash flow may have forced you to rely on your credit cards or take out a loan which may have just made your situation worse. Without a reliable income, you might be delinquent on your payments or you might have defaulted already. The end result is that your credit score dropped to alarmingly low levels.

On Using Personal Loans To Bring Your Credit Score UpYou are not alone, though. A lot of consumers are facing the problem of carrying very low credit scores. As you may know, low credit scores is a huge detriment in getting by these days. A low credit score will result in you being unable to apply for a loan or a credit line. Worse, it can also ruin your chances of getting employed. So how do you get your credit scores to go back up.

One of the few completely reliable way of getting a credit score to go up is to pay off loans on time. Basically, you need to show credit companies and credit reporting bureaus that you can pay your debts and loans well. This will paint you as a reliable and low risk borrower for lenders. However, how do you start doing that. One way is to take out a personal loan.

Personal loans offer a great opportunity for you to get your credit score up – that is if you can keep up with the payments. The problem is that, with a low credit score, you are unlikely to get a personal loan approved. Even if you do get a loan approval, you will most likely end up with a bad deal such as a loan that carries high interest rates.

A better approach is to get a secured personal loan. A secured personal loan is a loan that needs a set amount deposited into an account with the lender or some other type of collateral for the loan to get approved. Should you be unable to pay off your loan, the lender will end up with the amount you deposited in the account or with whatever collateral you put up.

The best thing about secured personal loans is that they usually come with better interest rates. This makes using a personal loan to get your credit score up less riskier for you. It might also build up better financial habits for you since you have a collateral to consider if in case you are considering defaulting on your payments.

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