Should I Take Out a Loan Just To Build Credit?

There is no quick answer to this question, the reality is you can take out a loan to help build your credit score and credit rating, but you shouldn’t have to do this. There are other ways to increae your credit score without taking out a loan.

There can be many good reasons for someone to take out a loan:

* Buy a car

* Buy a property (mortgage loan)

* Consolidate accounts (debt)

* Weddings

* Holidays (debatable)

* Start a business

There are loans for just about any reason, however, just to build credit, while an idea, as we will see there are other ways to do this.

Will Taking Out a Loan Improve My Credit?

The answer to this is probably so, yes.

By taking out credit and paying that credit or loan or credit card off, you show responsibility in handling credit. The paying off of a loan also can increase your credit score, as the loan will be reported to the credit bureaus as paid as agreed.

Having accounts you have taken out paid in full as agreed, can increase your credit score. Just as paying late, having arrears or defaults, can drastically reduce your credit score.

What Came First: The Loan or Credit Scores How to Get Credit if You Have None

There in lies the rub, as they say.

How can you get credit, if you have never had credit?

There are a few ways, and credit builder credit cards is one option.

These are specific credit cards for people with bad credit or no credit, and offer a way for them to rebuild their credit rating, or build a credit rating.

There also is the option of a guarantor loan.

Guarantor loans are loans that are based on affordability and the fact the borrower has a guarantor, not based on credit scores.

A guarantor is someone who knows the borrower, and feels hey will repay the loan, so as a guarantor they state they will repay the loan should the borrower fail to do so.

Another way to build a credit history and credit rating.

Ways to Increase Your Credit Score Without Taking Out a Loan

There are ways to increase your credit score and NOT take out a loan. The starting point is to get a copy of your credit history, and also know your credit score.

From there you will know if your credit score is low, and also if there are any errors or omissions on your credit history. Correcting these is one way to improve your credit score.

Electoral Roll: Getting on the electoral roll is one way to increase your credit rating without taking out a loan.

Lenders use the electoral roll to verify identities, and by being on one, it helps improve your chances of getting a loan.

Rental Exchange: If you are a tenant and paying rent each month, you are not getting credit on your credit history for doing this. By having your landlord get on the Rental Exchange, and reporting your rent as being paid on time each month, this helps to build a credit history, and credit score.

Leave your comment

<strong>What is Our Criteria For Applying?</strong> 
Every lender on our website has their own specific criteria by the basics are mentioned below and you must have a guarantor to be eligible. Simply select the lender of your choice and you will be taken directly to their website where you can apply. You will be required to submit your details including:<li style=”text-align: center;” data-mce-style=”text-align: center;”>Name (must be over 18 as the borrow, 21 or 25 as the guarantor)</li><br /><li style=”text-align: center;” data-mce-style=”text-align: center;”>Residence (your chances will improve if your guarantor is a homeowner)</li><br /><li style=”text-align: center;” data-mce-style=”text-align: center;”>Employment status (must be employed or on a pension)</li><br /><li style=”text-align: center;” data-mce-style=”text-align: center;”>Income (earning at least £600 per month and able to make repayments)</li><br /><li style=”text-align: center;” data-mce-style=”text-align: center;”>Monthly expenses (not have too many loans open or in major debt)</li>
You will then be asked to include the details of your guarantor and as mentioned above, this is usually someone who you know and trust and wants to help you with your personal finances. Ideally, a guarantor with good credit will maximise your chances of being approved based on the idea of ‘if someone with good credit trusts you, well we can too.'<strong>How Much Can I Borrow From Guarantor Loans?</strong>Guarantor Loans gives applicants the chance to borrow £500 to £15,000 depending on the lender. Some lenders we feature like Buddy Loans only have a maximum loan value of £7,500 and TFS Loans is the only lender that stretches up to £15,000.Factors that can influence the amount you can borrow revolve around having a good guarantor. One that is a homeowner, with solid employment, income and good credit rating will maximise your chances of borrowing the largest drawdown possible.The lenders featured on Guarantor Loans see a homeowner as someone who has already gone through the rigorous process of credit checking and affordability and if they can afford a house, they should be able to act as a guarantor for you.By comparison, having a guarantor that is not a homeowner offers slightly less security and means that amount you can borrow is slightly less too.Higher amounts may be available to those who already have a better than average credit rating, are homeowners themselves and a repeat customer with the lender who has already paid their loan on time. To apply directly with your lender of choice see <a href=”” data-mce-href=””>direct lenders</a>.<strong>What Does The Guarantor Have To Do?</strong>Upon completing an application, the lender will typically send you a <a href=”” data-mce-href=””>pre-contract loan agreement</a> and SECCI (Standard European Consumer Credit Information form) which will highlight the terms of your loan. You and your guarantor will be required to review the terms of the loan, including the loan drawdown, fees, repayment dates and responsibilities – and this can be signed via an online verification process using your email and mobile phone.The lender will usually carry out an individual phone call with you and your guarantor to ensure that you both understand the responsibilities and what is required of you – notably that if you cannot make repayment, your guarantor will be required to pay on your behalf. Further to some additional credit and affordability checks, funds can typically be transferred within 24 to 48 hours (or sometimes on the same day).<strong>Are Guarantor Loans Available For Bad Credit Customers?</strong>Yes, even if you have a history of adverse credit, <a href=”” data-mce-href=””>CCJs</a>, bankruptcy or IVAs several years ago, you can still be eligible. The idea is that you are using your guarantor and their financial history to ‘back you up’ and give your loan extra security. However, it is noted that your guarantor should have a good credit score and consent to co-signing your loan agreement.<strong>How Soon Can I Receive Funds?</strong>Guarantor Loans works with lenders that can facilitate funds within 24 to 48 hours of approval, or sometimes on the same day.When your funds are successfully transferred, most lenders working with Guarantor Loans will send the full amount to the guarantor’s debit account first. This is a standard security measure carried out by lenders to ensure that the funds are going to the right person and confirms the involvement of the guarantor. The guarantor usually has a ‘two week cooling off period’ where they can decide to pass on the money to the main borrower or they can change their mind and return the funds with no extra charges.