Borrowing moves a credit score in both directions, and the size of the move is usually smaller than people expect. What matters far more than taking a loan is what happens over the following months: whether each payment arrives on time, and what the debt does to how much of your available credit you are using.
Written by the Loan For Any Purpose USA lending team. Reviewed by the Loan For Any Purpose Editorial Review Team. Last reviewed September 10, 2026. We explain products we do not sell as well as the ones we do.
Soft and hard inquiries
A soft inquiry happens when you check your own rate or a lender pre-screens you. It is visible only to you and has no effect on your score. A hard inquiry happens when you formally apply for credit and a lender pulls your full report.
- A single hard inquiry typically costs fewer than five points and fades within a year.
- Inquiries stay on your report for two years but stop affecting FICO scores after twelve months.
- Several inquiries for the same type of credit in a short window are usually treated as one, because the models assume you are shopping rather than opening five accounts.
Checking your rate with us uses a soft inquiry. A hard inquiry occurs only if you accept a personal loan offer, and we tell you before that happens.
What actually moves a score
| Factor | Weight in FICO | How a loan interacts |
|---|---|---|
| Payment history | 35% | The big one. Every on-time payment helps; one 30-day late hurts for years. |
| Amounts owed | 30% | Installment balances count, but card utilisation matters far more. |
| Length of history | 15% | A new account lowers your average account age slightly. |
| Credit mix | 10% | An installment loan alongside cards can help a card-only file. |
| New credit | 10% | Where the hard inquiry sits. |
What to expect, month by month
- Application. A hard inquiry may knock a few points off.
- Month 1–2. The new account lowers your average age; the score often dips slightly.
- Month 3–6. On-time payments start accumulating. If you used the loan to pay down cards, utilisation falls and this is usually where the score recovers and passes its starting point.
- Month 6 onwards. Steady payment history does the work. By payoff you have a closed account in good standing.
What about payday loans?
Payday loans are generally not reported to the major bureaus, so repaying one does not build credit. The asymmetry is unkind: a defaulted payday loan sold to a collection agency can appear as a collection account and damage your score for up to seven years.
If you miss a payment
A payment is normally reported late once it is 30 days past due, not the day after it is missed. That window is the reason to call before the due date rather than after it: a moved due date is not a late payment. See trouble paying.
Our approach
We report installment and personal loan payments to one or more major credit bureaus, and checking your rate is always a soft inquiry.
Frequently asked questions
Does checking my loan rate hurt my credit score?
No. Checking your rate uses a soft inquiry, which is visible only to you and has no effect on your score. A hard inquiry happens only when you formally accept an offer.
How many points does a hard inquiry cost?
Usually fewer than five, and the effect fades within a year. Multiple inquiries for the same type of credit in a short window are generally treated as a single event.
Do payday loans affect your credit score?
Payday loans are generally not reported to the major bureaus, so repaying one does not build credit. However, a defaulted payday loan placed with a collection agency can appear as a collection and damage your score for up to seven years.
Will a loan improve my credit score?
It can, in two ways: by adding on-time payment history, and by lowering credit card utilisation if you used it to pay balances down. Both take a few months to show, and both reverse if payments are missed.
When is a late payment reported?
Typically once it is 30 days past due. That is why contacting your lender before the due date matters: a due date that has been moved by agreement is not a late payment.
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