Credit Building > Your guide to loans for credit building

Your guide to loans for credit building

Wollit Team3 minute read · Updated 12th August 2024

Loans for credit building may be something that you have considered when looking to boost your credit score. Whether liked or otherwise, the truth is that the special number that we are allocated in terms of credit is extremely important. It can affect our ability to get a mortgage, subscribe to internet and TV services, and even mobile phone contracts.

Given the wide-ranging impact that your credit score can have, it makes sense for people to seek out ways to improve it. Once you have an understanding of what your credit score is, and how it is calculated, you will see that there are numerous things that you can do to help. Loans for credit building come with some great advantages, as well as some points to watch out for. Let’s take a look.

How loans can help with building credit

Part of having a great credit score is having a great credit history. There are times when people suffer setbacks that see their score take a hit. Then there is the challenge that everyone faces at the start of their financial journey: they have no credit history at all. Here’s how loans for credit building can help:

They show that you can be trusted with credit

When it comes to getting any form of credit, what lenders are looking for is your ability to repay what you borrow. A loan for credit building allows you to build up some evidence to show that you can manage your money and pay on time. Showing that you take your financial responsibilities seriously is good in the eyes of lenders who are always looking to mitigate their risk.

Your payments are reported to credit reference agencies

In the UK there are three credit reference agencies. These agencies hold a whole host of information on us all. They see the credit you have and how you manage it. Every time a payment is made towards your loan, it will be reported to the credit reference agencies. This all adds to the evidence that shows you are great at managing money. It should see your score moving in the right direction.

What to watch out for with loans to build credit

While loans to build credit can help you get things moving in the right direction, they are not a perfect solution. There are a few things to look into and consider before you take the plunge. These include:

Are you able to budget for the repayments?

When you take on a loan to build credit, it is almost like getting a pet! You are committing for the long term to take care of it, nurture it, and ensure that it turns out well. With loans being a long term responsibility, you need to be sure that you can budget for the repayments and never miss one. Just as the good is reported to the reference agencies, so is the bad. This means that poorly managed, loans to build credit can actually have the opposite effect.

Be sure that you understand the interest rates

Of course, there is no getting something for nothing. When you take out a loan, you are going to have to repay what you have borrowed, but you will be paying interest too. The interest charged for a loan can vary greatly depending on the lender. Before you sign up and accept a loan, be sure that you understand the interest that is going to be charged and what this equates to money wise.

The results aren’t instant

Just like other methods of boosting your credit, credit builder loans are not instant. The key to building your credit score is consistency over a period of time. Yes, your monthly repayments are going to be reported to the credit reference agencies every month, but you won’t see the biggest benefits until the loan has been repaid in full. Depending on the term of your loan, this could be months, or even years, down the line.

Are there any alternatives to loans for building credit?

No doubt you already know the answer to this and that is why you are here and reading this. You may not fully understand it yet, but you know that Wollit offers a great way to improve your credit score. More than just being able to boost your credit score, Wollit also allows you to manage your money better. With a range of features, you will become financially healthier. Developing good financial habits will see you making better, more informed, decisions that see will ultimately benefit your credit score.

These features are there for everyone to take advantage of. They are free of charge and Wollit guarantees that everyone will be accepted. That being the case, there is no reason at all not to explore all that the Wollit app has to offer.

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How could Wollit help my credit score?

If you are looking for a great way to build credit then what we offer at Wollit is a fantastic solution. The Wollit app allows you to start using our credit building service after signing up, which only takes a few minutes. By subscribing for as little as £7.99 per month, we will report your monthly payments to all 3 UK credit reference agencies. This builds up your positive credit history, the single most important factor affecting your credit score.

If this sounds like something that can benefit you, and that all-important magic number that we all have, why not download the app and explore exactly how Wollit can help you. Improvements to your credit score are not guaranteed.