Does taking out a personal loan affect your credit score?

Yes — applying for a personal loan triggers a hard inquiry (typically minus 2–5 points), and opening the loan initially lowers your average account age. But consistent on-time payments usually improve your score over time, and paying off high-rate credit card debt with a personal loan can provide a near-term score boost.

A personal loan affects your credit in several ways — some immediately, some over time. The CFPB's credit score guide explains the five factors that make up your FICO score. Understanding each helps you predict how a personal loan will move the needle.

Short-term impacts (first 6 months)

• Hard inquiry: when you formally apply, the lender runs a hard pull. This typically reduces your score by 2–5 points and stays on your report for 2 years (with effect fading after 12 months).
• New account average age reduction: opening a new account lowers your average age of accounts — a small negative under the 'length of credit history' factor (15% of FICO).
• Credit utilization improvement: if you use the loan to pay off credit card balances, your revolving utilization drops immediately — this can meaningfully boost your score (utilization is 30% of FICO).

Long-term impacts (6+ months)

• On-time payments build payment history: the single largest FICO factor (35%). Consistent payments over 12–24 months typically produce a meaningful score improvement.
• Credit mix improvement: FICO rewards having both revolving credit (cards) and installment loans. A personal loan adds installment credit to your mix if you don't already have it.
• Account age accumulates: over time, the loan ages and contributes positively to your average account age.
• Payoff: closing the loan removes it from active accounts, which can slightly reduce average account age — a minor effect that's usually outweighed by the on-time payment history built.

Credit score impact — verified facts

• FICO's payment history factor (35% of the score) is the most heavily weighted component. One missed payment can drop a good score significantly; consistent on-time payments over 12–24 months reverse most damage. — myFICO — What's in My FICO Score
• Rate shopping for personal loans within a 14-45 day window counts as a single inquiry under FICO 8 and most modern scoring models — letting you compare multiple lenders without multiplying the score impact. — myFICO — Inquiries and Credit Scores

Key takeaways

• The hard inquiry drops your score 2–5 points — temporary and minor if your credit is otherwise healthy.
• Using a personal loan to eliminate credit card balances can boost your score quickly by lowering revolving utilization.
• On-time payments are the biggest credit benefit — they build the most heavily weighted FICO factor over time.
• Rate-shopping within a short window counts as one inquiry — compare multiple lenders before applying.
• The net effect is usually positive over 12–24 months of consistent payments.

Related

• What is a personal loan?
• What affects your credit score?
• How do you improve your credit score?
• Is a personal loan for debt consolidation worth it?

Browse all answers
More answers to common questions about financing, banking, and credit.