Will Applying for a Loan Affect My Credit Score?

Emergencies don’t usually happen when it’s financially convenient, which can mean scrambling to find the extra cash to cover a  medical emergency, home repair, or other issue that needs quick money to resolve. Depending on the amount required, you may be able to cover it with your credit card – or cards – and that’s only if you can pay it off in full on the next billing cycle. If not,  you’ll be facing some hefty recurring interest charges. 

Instead, a personal loan is the best way to go. Personal loans’ interest rates are relatively lower than credit cards, with smaller monthly repayments spread over a longer period. It’s easier to squeeze the monthly loan payments than the high credit card payments. However, the common question about personal loans is if applying for a loan can affect a credit score. 

Will Applying for a Loan Affect My Credit? 

The answer to this question is both yes and no, depending on the lender you approach for a loan. Typically, all lenders make a credit inquiry to determine if they can trust you to repay the money disbursed to you because your credit history paints a clear picture of your creditworthiness. 

When a lender makes a traditional or ‘hard inquiry,’ the inquiry will show up on your credit report. If you approach several lenders and each conducts hard inquiries within a short time, your credit score suffers. Several inquiries are a sign that your creditworthiness is questionable, and this causes your credit scores to dip. However, other lending companies only conduct ‘soft’ credit inquiries, which do not always appear on your credit report. Even if they do, they are only visible to you when you view your credit reports, and this cannot hurt your credit score. 

Therefore, the answer to whether applying for a loan can affect your credit score is that it depends on the lender you approach. Lean towards companies that conduct soft credit inquiries, and when you get your loan, make regular payments until the loan is retired to boost your credit score in the long run. 

Who Monitors My Credit Scores? 

Three major credit reporting bureaus monitor your score: Experian, Equifax, and TransUnion.  Your potential lender will look into your credit history from them when you apply for a loan. The bureaus mark each credit check as an inquiry, but include hard inquiries when calculating your credit score. Usually, this will only be by a few points, but if you already have a bad credit history, short credit history, or only a few accounts, the hit can be more significant. 

Keep in mind that taking out the loan will also increase your debt-to-income ratio, and lower your score. However, if you repay the loan diligently, your loan repayment history will have a more significant effect on your score. If you continue to make your payments on time and as outlined in your lender’s agreement, you can recover those lost points and actually gain points. 

Still, when it comes to knowing whether applying for a loan can affect your credit, keep in mind that auto, school, or home loans are regarded differently from personal loans. Because many people apply for them and often need to inquire from multiple lenders, credit monitoring bureaus view these multiple applications as one inquiry. But that’s not how it works with personal loans. Each look at your credit history will be a separate inquiry, so if you’re shopping for the best interest rates and loan terms for a house or car purchase, it’s safe to ask around. 

Will Applying for a Minute Loan Center Loan Affect My Credit?

No. Minute Loan Center only conducts soft inquiries, and your credit score will not take a hit. While we want to ensure that you can repay your loan seamlessly, we have other methods of determining your ability to repay the loan. The soft credit check is only complementary. However, your positive loan repayment records with us will be published on your credit report to enhance your scores. Contact us today if you have questions regarding whether applying for a loan can affect your credit score and to apply for a quick loan today!

Kevin

Kevin brings over 15 years of experience in marketing, with a specialized expertise in growing online businesses. As the Director of Marketing at a leading FINtech company, he employs innovative strategies to enhance brand visibility and customer engagement. Kevin’s passion lies at the intersection of technology and finance, where he pioneers solutions that not only meet but exceed consumer expectations. His commitment to leveraging his expertise ensures impactful results and the building of lasting relationships in the digital landscape.