I am considering taking out a second personal loan, but don’t want my credit score to be impacted too negatively. Any recommendations?
Personal loans can both help hurt your credit and this depends entirely on the decisions made by the borrower:
Hurt- unpaid loans can reduce your credit score and sabotage your history /. getting into spiraling debt by adding more debt / additional fees of processing, late payments and so on can accumulate / hard to keep track of borrowings
Help -can help improve credit score if repaid on time and improve your general credit mix/ improve credit history and reduce credit utilization ratio due to alternate sources of revolving credit
Unfortunately, your credit score registers every time a lender even looks at your credit report, so going through another loan application process can be a drag on your credit score. Also, this will inevitably raise your debt-to-income ratio, and more payments can have adverse effects on your credit utilization ratios, which will all play an important part in your credit history.
Thus, if you take out another loan without carefully considering your current budget, it could reflect poorly on you as a creditworthy customer. However, if you have recently gotten a raise, some other influx of cash, or are otherwise confident in being able to make all necessary payments, then you can likely make up lost ground in your credit score over time.