Experian is one of the top three main credit bureaus, and their main responsibility is to keep track of your credit report and credit score. So, when it comes to taking out any type of loan, they are the best to offer this advice and ensure that your score remains intact.
A personal loan is a line of credit that helps you with any sort of purchases you may have. It is an open-ended kind of loan that does not limit what you do with the money, which means you can use it for whatever you want.
Please note that credit is an extremely powerful financial tool, and taking out any type of loan is a very big responsibility that should not be taken for granted. Before applying for a loan, ensure that you carefully consider all of the pros and cons.
Here Are Some Terms You Should Know About Personal Loans
Principal – This refers to the actual amount you will borrow. If, for example, you applied for $10,000, that will be the principal amount.
Interest – this is the return to the lender. When you take out a loan, usually you have to pay it back plus interest. If you borrow $10,000, you don’t pay back $10,000, but maybe $11,000 and above, as per the lender’s interest rate.
APR – this is an abbreviation for the Annual Percentage Rate. When you take out a loan, in addition to the interest, the lender will usually charge you some fees for the loan, and the APR incorporates the Interest rate, as well as other fees the lender may charge you.
Term – This is the length of time you are given to pay back the loan. It could be months or years.
Monthly payment – This is the amount of money you will be required to pay the lender each month. The payment includes the interest, as well as the principal payment. It is usually divided between the two, the interest and the principal.
How to Minimize the Impact of Inquiries
Whenever you apply for credit, the lender will have to view your credit report. This is a “hard inquiry,” and it is usually noted in your report. All hard inquiries remain on your credit report for at least 2 years.
Their impact, although it diminishes over time will have a negative effect on your credit score. If you are doing comparisons between different lenders and applying to more than one at a time, do so in a short time frame.
Generally, the credit scoring models will count multiple hard inquiries for the same credit product as a single one, as long as you do it within a very short period of time.
Let us explain this better; If you are going to do comparison shopping, which means that you want to check what each of the lenders on your radar is willing to give in terms of amount and rate.
You should check as many as you can within a short time, such as a week, so they can all be considered as one inquiry, therefore limiting impact on your credit report.
Another option that is likely to lessen the impact would be to ask the lender to either pre-approve or pre-screen your loan. This counts as a soft inquiry and does not affect your credit score.
The Impact of Personal Loans on Your Credit Report
Any type of credit you take should be managed wisely. This includes personal loans. These loans can be quite helpful if you manage them well, although, taking out any debt should never be taken lightly at all.
Before making any major credit decision, check your credit report in order to understand the impact of such a decision. All loans must be repaid on time, otherwise, the default will seriously affect your score negatively.
Contact Experian
If you would like to contact Experian with more questions or concerns, you can find their main address at 475 Anton Blvd. Costa Mesa, CA 92626. You can also call them at 1 (888) 397-3742.
Conclusion
Experian’s advice is that you should make sure you understand what you are getting yourself into, and the impact the personal loan will have on your credit report. You must take precautions to avoid any negative effects.
If you are not careful and damage your credit report, it will haunt you when you want to take loans for larger amounts like to buy a home or start a business.
Note: There are risks involved when applying for and using credit. Consult the bank’s terms and conditions page for more information.
