Do Personal Loans Affect Credit Score?

Yes, personal loans do affect your credit score.

They can help if you borrow wisely and pay on time, or hurt if you miss payments or take on more debt than you can handle.

KOHO Essential While You Build Credit

If you’re thinking about a personal loan, it helps to have your day-to-day money in a simple, with KOHO Essential:

• It has a low monthly plan fee that can be waived when you set up direct deposit or add +$1,000.

• Use a prepaid Mastercard® for groceries, bills, subscriptions, and travel.

• Grow your savings with a 2% interest savings rate on your entire balance.

• Earn 1% cash back on groceries, eating & drinking, and transportation.

• You can subscribe to Credit Building for $10/month, it's an affordable way to build your credit history.

• Enjoy unlimited transactions and free e-transfers (never worry about fees when sending money to someone again).

How Personal Loans Can Help Your Credit

A personal loan can be positive when you:

• Make every payment on time – on-time payments are one of the biggest factors in your score.

• Use the loan to clean up high interest debt – for example, consolidating expensive credit card balances into one structured payment.

• Add to your credit mix – having both revolving credit (like cards) and installment credit (like loans) can be a small plus.

Handled well, a personal loan shows lenders you can borrow responsibly and repay on schedule.

How Personal Loans Can Hurt Your Credit

A personal loan can hurt your score when you:

• Miss or pay late – late payments and defaults are major negatives.

• Take on too much debt relative to your income.

• Apply for many loans in a short time, triggering multiple hard checks.

And because a new loan lowers your average account age, you might see a small, temporary dip right after opening it.