Not every loan is perfect, but the right one can set your credit in the right direction.


While it may be an odd concept, sometimes accumulating more debt will actually contribute to restoring your credit score.

Of course, it isn’t that black and white.

Many factors determine whether or not a loan is beneficial, such as the term, amount, interest rate and flexibility of payment schedule.

But first, it’s important to understand just how these loans can affect your credit.

Your credit score is heavily influenced by the amount of debt you have accumulated that has been paid off as well as your successful payment history. By being approved for a short term loan, every successful payment is a baby step towards growing your credit score.

It is vitally important that payments are made on time. After all, payment history has some of the largest impact on boosting you credit score.

People may need a little extra cash for a number of reasons, but one of the most common reasons for needing a short term loan is to keep up with ongoing expenses, such as phone bills, rent or even credit card payments. When these bills are not paid on time, they can negatively affect your credit. A short term loan can give you breathing room to handle all of your expenses and avoid any negative impact missing a payment may have.

Even when you don’t necessarily need one, a short term loan can actually help speed up the process of repairing your credit. Taking out a term loan and repaying it as agreed upon will add some positive credit history to your record. Even if you’ve never had a short term loan before, using a service such as Affirm Financial can help add to your credit history and may improve your overall score in the future.

One common misconception, however, is that paying off a loan before the agreed term is up will have a more positive affect on your overall credit. That isn’t always the case. Credit accounts are essential to continually build your credit. When a loan is paid off ahead of time, the account will be closed. Regular payments on an open account shows that you can use credit responsibly.

Finally, a term loan can be used to consolidate all outstanding debt, such as debt that is carried via a credit card. Having a number of outstanding balances can negatively affect your credit score. A term loan, however, is paid in installments, and is generally weighted differently against your credit history than a revolving account such as a credit card.

When used correctly, a term loan will provide short term relief with long term benefits. To learn more about term loans with Affirm Financial, click here.