How to Build Credit with a Personal Installment Loan, Nampa, ID

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If you're looking for the best way to build credit while also looking to resolve a financial concern such as medical debt relief, debt consolidation, or emergency car repairs, Idaho Finance is here to help. Our blog is intended to provide useful information to those who need immediate financial assistance while also looking after their fiscal futures.

It can be hard to make sense of the options when looking for fast financial aid. Most people immediately jump to one of three thoughts:

Loans from family & friends
Credit cards
Payday advance loans

While each of those options may have some benefits, neither loans from family & friends nor payday advance loans help you build your credit while also resolving a cash flow problem. Credit cards may help, but they do so at tremendously high interest rates and often with payment plans that almost entirely go to the interest of your card balance and not the principal.

Personal installment loans, like those offered by Idaho Finance, are a low-interest loan option with steady, reasonable payment plans that also improve the credit factors examined by companies like Experian, TransUnion, and Equifax. It is also possible to get the urgency that payday loans provide (We offer same-day, cash installment loans.) without the non-refundable fees and the exorbitant interest rates.

How Is My Credit Score Calculated?: The Big Three

To understand how personal installment loans can help build your credit, it's helpful to understand how your credit score is calculated. "The Big Three" are the top three companies that other lenders consult to check your credit rating: Experian, TransUnion, and Equifax. While there are smaller details that come into play, or slight variances among The Big Three, your credit score is–in very simplified terms–determined by the following formula:

Payment History (35%): Your payment history rating improves if you pay your bills on time. If you consistently pay your bills when they're due, your score goes up. If you're late or miss payments, your score goes down. The rapid repayment plans of many payday loans can often set borrowers up for failure in this area.

Amounts Owed (30%): This number isn't so much about the exact dollar amount of all of your debts; it's examining more closely how much debt you have compared to your debt limits. For example, if you have a credit card with a $5,000 limit, your credit score will decrease slightly each time you get closer to your $5,000 limit. If you maintain no balance or a very low balance on that credit card and consistently pay your bill, your overall credit score goes up. This shows if you're using the credit you've been given responsibly.

Length of Credit History (15%): Maintaining accounts with the same creditor for a longer period improves your credit history. It allows The Big Three to establish a historical track record of you managing your credit well.

New Credit (10%): Attempting to open multiple accounts in a short period of time can lower your credit score. It may be a sign to creditors that you're having financial trouble and are trying to cover a lot of money at once.

Types of Credit (10%): Lenders like to see a mix of different types of credit, including credit cards, installment loans, and mortgages. It shows that you can handle different types of financial responsibilities.

A perfect credit score is 850. If you have no reportable credit, you may have no credit score at all.

How Do Installment Loans Build Credit?

Based on the credit calculation formula above, we can now help you understand how a low-interest personal installment loan can be one way to fix your credit score, especially in comparison to the damage that can be done by a payday advance loan.

Payment History: Installment financing is designed to be an achievable goal. Because installment loan companies like Idaho Finance have low-interest plans with reasonable payment schedules, we can help you stay on track with on-time, regular payments.

Amounts Owed: With both short- and long-term installment loan options, you can choose the loan amount that will best serve your financial goals and keep you within a helpful debt-to-income ratio on your credit score.

Length of Credit History: As mentioned above, with both short- and long-term options, you can make smart loan choices about the areas of your credit score that need the most help. We can offer longer-term installment lending than a payday lender.

New Credit: Some people attempt to avoid taking out a single loan by filling in the gaps with several smaller credit cards. With an easy-to-apply option like Idaho Finance installment loans, you can protect your credit by having one inquiry from a reliable lender instead of several applications from several different credit cards.

Types of Credit: Installment loans are one appreciated source of credit on a credit report. Even if you only needed one payday advance loan, those types of loans do not appear on a credit report, so you don't get 'credit' for the work you've done to manage your finances.

While none of the credit score calculation categories include interest rates, every time you take on debt that has a higher-than-necessary interest rate, you are giving away money to your lender and decreasing your chances of making on-time payments, making full payments, and paying down the principal of your loan.

With lower-interest options like installment loans, you give yourself many more opportunities to put your money where you want and continue to boost your credit score in the process.

If you are looking for personal loans (not payday loans) in Nampa, ID, and the surrounding areas, Idaho Finance should be your first call. We are a reliable lender of same-day and other cash loans in the form of installment loans. Whatever your financial need, we would like to be part of the solution.