Will a small personal loan help my credit?

Yes, a small personal loan will help your credit as long as you get the loan from a reputable lender that reports to the major credit bureaus and you make the payments on time. The lender will report positive information to the bureaus if you’re up to date on your payments, which will improve your score over time.

When you initially get the loan, your score may drop by about 5 - 10 points from the hard inquiry into your credit history. This can be fixed with a few months of on-time payments, though, and your score should improve from there. To see how a personal loan can affect your credit score, check out WalletHub’s free credit score simulator.

Another type of small personal loan that can improve your credit is a credit-builder loan. With a credit-builder loan, the lender will put up to a few thousand dollars into a savings account for you, and you’ll make monthly payments equivalent to the amount in the account, plus interest, for 6 - 24 months. At the end of the loan term, after you’ve made all the payments, you’ll receive the money in the account. 

To read about the top-ranked offers, check out WalletHub’s picks for the best small personal loans and the best credit-builder loans.