You’ve worked hard to build your business and personal credit, but times are tough for everyone, and even the best companies need some extra capital at times.
One question that we get from potential clients exploring their credit options is “Do unsecured loans hurt your credit?” As with most things in life, the answer can vary depending on your situation, but it is almost always less of an issue than you might think.
What Goes into Your Credit Score?
Before we can get into just how much an unsecured loan might affect your credit, we first need to understand the basics of how a credit score is calculated.
The following five components impact your credit score:
- Payment History (35%)
- Credit Utilization (30%)
- Credit History (15%)
- Credit Mix (10%)
- New Credit Requests (10%)
Understanding how much each of these five components plays in calculating your credit score will give you a good idea of where you stand and what you might be able to improve.
So, Do Unsecured Loans Hurt Your Credit?
Assuming that you will always make the payments on time, an unsecured loan will only help your credit score in the Payment History and Credit History departments. It will also give you a different type of credit, which should improve your Credit Mix.
If you plan to use the funds from an unsecured loan in place of credit cards, then you will also be improving your Credit Utilization.
That means that the only negative impact from an unsecured loan will be a small, temporary ding to your New Credit Requests, which is completely normal as long as you don’t already have a bunch of recent requests for some reason.
Not only will an unsecured loan have a very minor, if any, impact on your credit score, but qualified candidates may be able to borrow as much as $450,000 at highly competitive interest rates. Apply for an unsecured loan with Jumpstart Finance today to take advantage of our professional expertise in non-collateralized lending.