Do signature loans build credit? They can, but it depends on whether your lender reports the account and payment activity to a consumer credit bureau. Some lenders report ongoing account activity and some do not. Even when a loan is reported, there is no guaranteed number of points your credit score will go up or down because your overall credit history matters too.
What reaches your credit report depends on what the lender reports
A loan does not automatically appear on your credit report just because it exists. Generally, the lender must furnish information about the account to a consumer credit bureau for the account to become part of your credit history. That process is called furnishing. Federal law does not generally require lenders to furnish account information, but lenders that do furnish information have obligations regarding the accuracy and integrity of what they report.
So there are a few situations you can be in:
- Your lender does not report the account. Your regular loan and payment activity will not become part of your credit history through that lender.
- Your lender reports to a specialty bureau. That information may be available to lenders that use that bureau, but it is different from reporting to one of the nationwide consumer credit bureaus.
- Your lender reports to a nationwide consumer credit bureau. In that case, the account and reported payment activity may become part of your credit history and may affect your credit profile.
The important point is simple: two lenders can offer similar loans and have very different credit-reporting practices.
How to find out which lenders report to credit bureaus
If credit reporting matters to you, ask whether the lender reports the account, which bureau receives the information, and whether ongoing payment activity is reported.. You can also review your own credit reports through annualcreditreport.com to see what is actually appearing on your file.
Do signature loans build credit at Dollar Loan Center?
At Dollar Loan Center, the answer depends on where you borrowed. Here is where we stand, state by state.
Nevada
Dollar Loan Center reports ongoing loan and payment activity for Nevada accounts to TransUnion. Because that information becomes part of your credit history, a Nevada signature loan may affect your credit profile. That does not mean DLC can predict exactly how your credit score will change. Credit scores consider many factors, and the effect of any one account can vary from person to person.
Utah, Idaho, Wisconsin, Missouri and Oklahoma
Dollar Loan Center does not report ongoing loan or payment activity to consumer credit bureaus for accounts in these states. So if you have a DLC loan in one of these states, your regular loan and payment activity is not being furnished by DLC to a consumer credit bureau.
One more Nevada-specific point: Nevada also has separate statewide database reporting requirements for certain loans. That database is not the same thing as a consumer credit bureau and should not be confused with reporting account information to TransUnion.
We do check your credit when you apply
Dollar Loan Center reviews TransUnion credit information as part of the application and underwriting process for new customers in the states where we lend. That is separate from whether we report your account afterward.
The type of credit inquiry applicable to your transaction is disclosed during the application process. Review your application and loan documents for the information specific to your transaction.
You can see current terms and requirements on our signature loan page and find your nearest branch on the locations page.
How an installment loan can affect a credit score
Credit scores look at several parts of your overall credit history. Those can include payment history, how much debt you owe, how long you have had credit, recent credit activity and the types of credit accounts in your history.
A signature loan is only one part of that picture. If the lender reports the account, the information may become part of your credit history. But there is no universal formula that says making a certain number of payments will increase your score by a certain number of points.
- Payment history, about 35%
- Amounts owed, about 30%
- Length of credit history, about 15%
- New credit, about 10%
- Credit mix, about 10%
A signature loan touches four of the five.
Payment history
If a lender reports ongoing payment activity, that history may become part of your credit record. On-time and late-payment information can matter, but the effect on a particular score depends on the rest of your credit file.
Credit mix and amounts owed
An installment loan may also affect the types of accounts in your credit history and the amount of debt you owe. How much those factors matter varies from person to person, so it is better to think of the loan as one piece of a larger credit picture.
New credit and length of credit history
Opening a new account can also change the age and makeup of your credit history. The impact is not the same for everyone, and no lender can guarantee a particular score result.
Do installment loans build credit as well as credit cards?
There is no one-size-fits-all answer. Installment loans and credit cards are different types of credit accounts, and scoring models can consider them differently. The effect of either type of account depends on how it is reported and on the rest of your credit history.
How long before a loan shows on your credit report
There is no single timetable that applies to every lender or every account. When a lender furnishes account information, it can take time for the information to appear because lenders and credit bureaus update information on reporting cycles.
If you want to know whether a particular account has been reported, check your credit report and ask your lender about its reporting practices.
What happens if you miss a payment
Missing a payment can have consequences even when a lender does not furnish ongoing loan activity to a consumer credit bureau. Depending on the loan and how delinquent the account becomes, those consequences can include late fees and collection activity.
For Nevada DLC accounts, because ongoing loan and payment activity is furnished to TransUnion, payment history may also become part of the consumer’s credit record.
If you are behind, or you know you may have trouble making a payment, contact us early. Waiting until the account becomes seriously delinquent usually gives you fewer options, not more.
Should you take out a loan to build credit?
Probably not.
Borrowing money you do not need just to try to raise a credit score can be an expensive strategy. You pay interest on the loan, and any credit impact depends on whether the lender reports the account and on your individual credit history.
If building credit is your primary goal, there are other options you may want to consider:
- A secured credit card. You typically provide a deposit and use the card like a traditional credit card. How you manage the account may become part of your credit history if the issuer reports it.
- A credit-builder loan. These products are specifically designed to help consumers establish payment history, although terms and reporting practices vary by lender.
- Becoming an authorized user on an established credit card account. Whether this affects your credit depends on the issuer’s reporting practices and the account history.
- Paying down credit card balances. Lower balances can affect factors used in credit scoring, although individual results vary.
Take a signature loan when you need the money and the payment fits your budget. If it also helps your credit, treat that as a potential benefit, not the reason you borrowed.
Common questions
Do signature loans build credit?
They can affect your credit if the lender reports the account to a consumer credit bureau. Whether the effect is positive, negative or minimal depends on what is reported and on your overall credit history.
Does Dollar Loan Center report loan payments?
In Nevada, yes. Dollar Loan Center reports ongoing loan and payment activity to TransUnion. DLC does not report ongoing loan or payment activity to consumer credit bureaus for accounts in Utah, Idaho, Wisconsin, Missouri or Oklahoma.
Does applying for a signature loan hurt my credit?
Applying for credit may involve a review of your credit information. The type of credit inquiry applicable to your transaction is disclosed during the application process, so review the information provided with your application.
Will paying off my signature loan early help my score?
There is no guaranteed credit-score increase from paying off a loan. Credit scores consider many factors, so the effect of paying down or paying off an account can vary depending on your overall credit history.
Can a signature loan hurt my credit even if it never helps it?
Credit impact depends on the lender’s reporting practices and your individual credit history. If a lender reports account activity, both the information reported and the rest of your credit file can affect the result. Ask about reporting practices before you sign if credit reporting matters to you.
This article is general information about how consumer credit reporting works. It is not credit counseling or financial advice. Your results depend on your own credit file and your lender’s reporting practices.