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No Loan Required For High Credit Scores

Posted By Jim On 11/08/2006 @ 8:58 am In Credit,Personal Finance | 3 Comments

I don’t know how many times I’ve seen someone say that in order to have a high credit score, you need to have some debt. While it is true that having some debt will help your score, since continual payment of that debt will demonstrate responsibility, no one should go out and acquire debt with the expressed intent of raising your score. I repeat, do not acquire debt with the sole purpose of improving your credit score because it is unnecessary. Paying the interest on that debt, which will invariably be high especially if you’re talking credit cards, will not give you an effective return on investment – it’s simply not worth it.

Your credit score is a combination of many things [3] but how each part contributes to your score is still proprietary information so you don’t know how your score is truly affected by getting that new loan. Now, if you are on the other side and you’re wondering if a loan will harm your credit score, don’t be concerned. Remember that the credit score is meant to reflect your ability to repay loans and lenders have become very good at determining your ability based on your current debt, monthly payments, and income. If you’re able to repay that debt on time every month and your income permits it, they’ll loan you more money.

If you really really want to pursue this strategy of getting a loan to boost your score, the only suggestion I could give is that you try to get a credit card with a 0% balance transfer offer [4] (there are some 0% balance transfer cards giving $100 for signups [5]). Every month, for the duration of your “loan” from the credit cards, you’ll be making regular monthly payments but there will be interest accrued – this is the theoretical best of both worlds. Now, some would say (I’m one of them) that if you’re able to get a 0% balance transfer card, chances are your credit score is pretty good anyway, so this might be a catch-22 type situation.


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[2] Email: mailto:?subject=http://www.bargaineering.com/articles/no-loan-required-for-high-credit-scores.html

[3] credit score is a combination of many things: http://www.bargaineering.com/articles/credit-score-demystified-sorta.html

[4] credit card with a 0% balance transfer offer: http://www.bargaineering.com/articles/using-0-balance-transfers-to-pay-off-debt.html

[5] 0% balance transfer cards giving $100 for signups: http://www.bargaineering.com/articles/100-credit-card-signup-deals.html

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