Quick answer
A personal loan can cause a small, temporary dip from the hard inquiry and the new account. Over time it can help: on-time payments build payment history, the 35% factor in a FICO score, and using it to pay off credit cards can lower your utilization. Missed payments will hurt.
Short answer: a little at first, and possibly a lot better later, depending on how you use the loan and whether you pay on time.
Short-term effects
| Effect | Why | How long |
|---|---|---|
| Hard inquiry | You applied for credit | Stays 2 years; FICO counts 12 months |
| New account | Lowers the average age of your accounts | Fades as the loan ages |
| New debt | Adds to the amount you owe | Shrinks as you pay it down |
Long-term effects
- Payment history (35% of a FICO score). Every on-time payment adds positive history. Every late payment hurts.
- Amounts owed (30%). myFICO says FICO scores consider how much of an installment loan you still owe versus the original amount, so paying it down helps over time.
- Credit mix (10%). Adding installment credit to a card-only file can help a little.
The consolidation effect
If you use a personal loan to pay off credit cards, your revolving utilization can drop sharply, since card balances move to an installment loan. That benefit disappears if the cards fill back up. Read does debt consolidation hurt your credit.
How to keep the dip small
- Prequalify with soft inquiries.
- Apply only to the lender you choose.
- Set up autopay from day one.
- Do not open other new accounts around the same time.
Plan the payoff with the loan payoff calculator.
If you need to borrow while you work on your credit, use the form on this page to see whether partner lenders may have an offer, or call (800) 236-7761. Compare offers by APR and total cost.
Examples are illustrations, not offers. Approval, APR and terms depend on the lender, your state and your credit profile.
Frequently asked questions about does a personal loan hurt your credit? short and long term
How many points will a personal loan drop my score?
It varies by person. The hard inquiry and new account usually cause a small dip that fades with on-time payments.
Does paying off a personal loan early hurt my credit?
Paying early saves interest and closes the account once it is paid. Check your loan agreement for a prepayment penalty first.
Is a personal loan better for credit than a credit card?
A personal loan is installment credit and does not count toward revolving utilization the way card balances do. Using one to pay off cards can lower utilization, if you keep the cards paid down.
Does checking personal loan rates hurt my credit?
Prequalifying usually uses a soft inquiry, which does not affect your score. The final application is usually a hard inquiry.
Sources
- myFICO: What's in my FICO Scores? (accessed 2026-10-09)
- myFICO: How new credit impacts your FICO Score (accessed 2026-10-09)
- myFICO: How owing money can impact your credit score (accessed 2026-10-09)
- myFICO: Length of credit history (accessed 2026-10-09)
- myFICO: Credit mix (accessed 2026-10-09)
- CFPB: What is a credit inquiry? (accessed 2026-10-09)
- CFPB: What is a prepayment penalty? (accessed 2026-10-09)
Last updated 2026-10-09. How we research and update pages.