Skip to Content loading...

Not a member yet?

Listerhill Credit Union is a nonprofit financial cooperative improving lives in our community.

If you live in Alabama, Georgia, Mississippi, Florida, or Tennessee, you are eligible to become a member. Depending on your individual eligibility, we may require membership into an approved association at no cost to you.

You can also qualify for membership by being a family member of a current or potential Listerhill member.

With only $5, you can join Listerhill today and start taking advantage of a lifetime membership.

Applying for loan

How to Use a Personal Loan to Build Credit

Did you know that you could use a personal loan to build credit? It’s as easy as taking out a small loan and paying it off on time!

Editorial Note: Articles published are intended to provide general information and educational content related to personal finance, banking, and credit union services. While we strive to ensure the accuracy and reliability of the information presented, it should not be considered as financial advice and may be revised as needed.

A great credit score is key to unlocking all the financing you need in life – but what if you're just starting on your financial journey? Or maybe you made a few missteps and need to repair your credit score?

There are options to get your credit on the right track. One consideration is taking out a personal loan to build credit. Believe it or not, borrowing and repaying a sum of money can take your credit score to the next level!

Let’s take a closer look at credit, personal loans, and how you can use a personal loan to build credit.

What You Need to Know About Credit

In a nutshell, your credit score is a mash-up of your financial activity turned into a single number. The most common type is your FICO score.

The first step toward building credit is understanding how your credit score works.

What Affects My Credit Score?

Calculating your credit score is a kind of magic best left to the experts, but here's a peek under the hood at what they're looking for:

  • Loan and credit card payments (timely payments will build it and delinquent payments will hurt it)

  • How much of your available credit you've used

  • How long you've held credit accounts

  • How many credit accounts you've applied for

  • What different types of credit you have (personal loan, auto loan credit card, mortgage – the more, the better)

What Doesn't Affect My Credit Score?

You might be surprised to learn the following things don't have an impact on your score:

  • Your job and income

  • Your bank balance

  • Debit card activity

  • Your partner's credit score

  • Late fees (for payments made after the due date but before the 30-day mark when they're reported as delinquent)

What Is a Good and Bad Credit Score?

If you have no credit right now, just start by getting on the map – you'll have plenty of time to reach excellence later! Here is a breakdown of the credit score rankings:

  • An excellent credit score: 720 to 850

  • A good credit score: 690 to 719

  • A fair credit score: 630 to 689

  • A bad credit score: 300 to 629

Who Decides My Credit Score?

Your lenders electronically report your financial activity to three main credit bureaus (TransUnion, Equifax, and Experian) about every 30 days. You're allowed to request one free credit report from each of them every 12 months.

Keep in mind that the three bureaus each calculate your credit score in slightly different ways so it may be slightly different between them.

How Personal Loans Work

A personal loan is a type of installment loan. This means you borrow a fixed amount of money from your chosen lender and you agree to pay it back in regular, equal installments until it's paid off.

What Can I Use My Personal Loan For?

There are no restrictions on how you use your personal loan! You could use it for:

  • Study expenses

  • Car repairs

  • Health care bills

  • A weekend getaway

  • Debt consolidation

  • Any other purpose that needs quick funds

What Is a Loan Term?

You'll be able to choose how long it takes you to pay the loan back, which is known as the term. The term you choose – and your credit score – will affect the interest rate you get.

A shorter loan term often equals a lower interest rate.

What Is APR?

Interest rates for a personal loan are usually shown as an annual percentage rate (APR). This includes the interest you pay your lender for borrowing the money, plus any fees all rolled into one.

The higher your credit score, the better APR you're likely to be offered by your lender!

Using Your Personal Loan to Build Credit

So now you know a great credit score means better interest rates, but what can you do if you haven't got any credit history yet?

Improving your credit can be as easy as taking out a loan and paying it back. Using a personal loan to build credit now will help you get lower rates later on bigger purchases or expenses, such as a car, home, or dream vacation.

Here's what to do to get yourself on the credit map:

  1. Shop around for a personal loan with a good interest rate.

  2. Be sure to check your local credit unions as they may offer more competitive rates than other financial institutions. (ahem)

  3. Start by borrowing a small amount.

  4. Make all your monthly payments on time until you've paid off the loan in full.

  5. Your credit score should start building in several months.

Use a Listerhill Personal Loan to Build Credit

We all have to start somewhere in life and the same is true for your credit history. Nobody is born with an excellent score. It takes time to build credit so you can get all the financing you need for a happy and secure life.

That's why a personal loan from a trusted financial institution is the perfect stepping stone for your future. At Listerhill, we are ready to help you use a personal loan to build credit.

A personal loan is also a great tool to have in your box if you're short on cash. Personal loans are more convenient and more affordable than payday loans. Click to find out more!

Personal Loans vs Payday Loans: Which One is Better?

default icon for Solution Finder Intro
What can we help you with? *
default icon for Checking For Mature Members
What are you borrowing for?
default icon for Checking For Mature Members
Vehicle Options
default icon for Checking For Mature Members
Home Options
default icon for Carrolls
What are you saving for?
default icon for Carrolls
How old are your kids?
default icon for Cord
Which of these banking options are you interested in?
default icon for Cord
How old are you (or your child)?
default icon for Cord
How old are you?
default icon for Cord
What kind of account are you looking for?
search popup background

What are you looking for?

Common Links

Frequently Asked Questions

  • What are some factors to consider when choosing a rewards credit card?

    Determine whether you prefer cash back, travel points, or other reward types. Then, explore how and when reward points accumulate, if there are spending caps, and how easy it is to redeem your rewards. Financial institutions like credit unions tend to offer great rewards credit cards.

  • How can I compare credit card offers before making a decision?

    Carefully review rewards programs, like cash back or travel miles, when comparing credit cards. Also, consider the rewards rate, interest rates, annual fees, and any additional benefits the card includes.

  • What are the benefits of choosing a credit union's credit card compared to others?

    Our credit cards reward you for making purchases. They feature competitive interest rates and fewer fees than traditional banks. Members benefit from personalized customer service. We work closely with you to understand your financial situation and needs.

  • What if I prefer to make my payments through a pre-authorized automatic payment arrangement (ACH)?

    Please contact TruHome at 844-203-3642 to set up automatic payments or visit here to set them up yourself.

  • What if I prefer to make my payments through the Listerhill Mobile Banking app or Online Banking?

    Unfortunately, when the transfer occurs, mortgages will not be displayed on our app or in online banking, but we are working to bring that functionality ASAP.

    In the meantime, please visit here to view all mortgage information and payment options.