How to improve your credit score with personal loans in 2026

Your credit score matters more than you might realize. It affects whether you can get a loan and how much interest you’ll pay. If you’re thinking of borrowing money this year for home improvements or paying off debt, boosting your credit score may be worth the effort.

The good news is that building your credit doesn’t have to be complicated. The key is to use your credit responsibly. If you’re considering a personal loan to consolidate debt at a better interest rate, you may be able to have a positive impact on your credit score by managing your loan wisely. We’ll break down what you need to know.

Understanding personal loans and credit

Your credit score is determined by how you’ve used debt and loans in the past. Personal loans are one form of debt that can impact your credit. Your ability to get a personal loan is also influenced by your credit.

Rocket Loans℠ offers personal loans in amounts from $2,000 to $45,000. They can be used for many purposes, including credit card consolidation, debt consolidation, or home improvement projects.

These loans are unsecured, which means they are different than secured loans because you don’t have to offer collateral to qualify for a loan. However, your lender will examine things like your finances, income, credit score, and debt-to-income (DTI) ratio. Expect to have to provide documents such as pay stubs, proof of address, and bank statements when you apply. The better your creditworthiness, the less you’ll pay for interest rates.

One important thing to know is that when you apply for any loan, including a personal loan, you’ll likely see a slight dip in your credit score. However, if you use the loan well and make your monthly payments, your score will tend to improve in the long run.

Which credit score factors can personal loans improve?

Your credit score is composed of five factors, in order of importance:

• Payment history
• Amounts owed
• Length of credit history
• Credit mix
• New credit

Personal loans can impact all of these factors but will be able to improve your payment history and credit mix, as well as a portion of your amounts owed.

Lowering the credit utilization rate

One portion of the amounts owed aspect of your credit score is your credit utilization ratio. This accounts for roughly 20% to 30% of your credit score.

Credit utilization is the percentage of your total credit limits you’re using.

For example, imagine you got a $20,000 car loan with a remaining balance of $12,000. You also have a credit card with a $5,000 limit and a $2,000 balance.

Your credit utilization ratio would be:

($12,000 + $2,000) / ($20,000 + $5,000)

$14,000 / $25,000 = 56%

The lower your credit utilization, the better. According to Experian, those with scores over 800 use just 7% of their credit, while those with just fair credit use 61% of their credit limits.

Personal loans can help you reduce your credit utilization, especially if you use one to consolidate your debt. Consider this example:

An individual has three credit cards with $10,000 credit limits on each ($30,000 credit limit total), but has used $20,000 of that credit limit. They then get a personal loan to consolidate their debt, so they apply for a $20,000 loan.

They pay off their credit cards but still have $20,000 in debt from their personal loan. However, they’ve added an additional $20,000 in extended credit. So while their previous credit utilization rate was 66% ($20,000/$30,000), the personal loan brings their credit utilization rate down to 40% (or $20,000/$50,000).

Potential for increased overall debt

One thing to keep in mind is that applying for a personal loan means taking on additional debt. If you’re not using the loan to consolidate other debts, you’re just adding more debt to your credit file and potentially increasing your credit utilization. That could hurt your credit in the long run and put a strain on your monthly budget with new payments to deal with.

Enhancing your credit mix

Your credit mix measures the different types of loans you’ve dealt with, such as mortgage, student loan, credit card, auto loan, or personal loan. Applying for a personal loan can improve your credit mix, which may boost your credit.

Credit mix has a relatively small impact on your credit, making up about 10% of your credit score. Still, every little bit can help.

Building positive payment history

The most important factor in your credit score, making up more than one-third of your total score, is your payment history. Every on-time payment builds your credit, while a single missed or late payment can do big damage.

Getting a personal loan gives you another bill to pay each month, giving you the opportunity to build your payment history over time. It may be a good idea to sign up for automatic payments to ensure you always pay your bill on time, avoiding damaging your score.

How to find loans that report to the major credit bureaus

There are three major credit unions: Experian, Equifax, and TransUnion. Each maintains its own credit file for you. If you want to boost your credit score, it’s important to work with lenders who will report your activity to all of these bureaus so that any lender who checks your credit will see the positive info.

Before applying for a loan, it may be worth asking your lender if they report to all three bureaus. You can also check the terms of the loan to see if it outlines credit reporting policies.

Specialized loans for credit improvement

Some lenders offer specialized personal loans designed specifically to help you boost your credit.

Debt consolidation loans

One type of loan to help build credit is a debt consolidation loan. When you apply for one of these loans, the lender disburses the funds to your other lenders, letting you turn multiple debts into a single one.

For example, if you have three credit cards with balances of $2,500, $3,250, and $4,250, you could get a personal loan for $10,000 and pay the cards off. Now, you have one debt of $10,000 and one monthly bill to pay instead of three. Plus, you may be able to consolidate the credit cards at a lower interest rate, saving you money.

These loans may help you get out of debt more quickly and improve your DTI ratio. However, you’ll still need to apply and qualify for these loans, so you’ll need reasonable credit, an adequate DTI ratio, and documentation of your finances.

Before taking on a loan, be sure to shop around so you can find the best deal.

Credit-builder loans

Credit-builder loans are a unique type of loan designed specifically to help people with poor credit improve their scores.

When you get a credit-builder loan, the lender does not actually provide the money to you. Instead, the cash is placed in a savings account or CD for your benefit. Each month, you get a bill, and as you make payments, the lender reports those payments to the credit bureaus.

If and when you pay the full balance of the loan, the funds in the savings account or CD are released to you. This makes credit builder loans much like a form of forced-saving plan that can also boost your credit. However, if you miss payments, they could also hurt your credit.

Keep in mind that these loans can charge interest and fees, so you do wind up paying for the privilege of improving your credit. However, depending on your situation, paying that cost may be worth it.

Exploring alternatives to loans

If you want to build your credit score, applying for a new personal loan isn’t your only option. Consider these alternatives.

Secured credit cards

If you have poor credit or are struggling to get a personal loan, you can also consider applying for a secured credit card. These work like other credit cards, but you must make an upfront cash deposit. The amount of your deposit usually determines your credit limit.

The good news is that your deposit reduces the lender’s risk significantly, so almost anyone can qualify for a secured card. You can then use the card and make payments that get reported to the credit bureaus, letting you build or rebuild your credit over time.

Becoming an authorized user on another account

Many credit cards allow the primary account holder to designate another person as an authorized user of the account. Authorized users get their own cards and can make charges just like the primary cardholder.

Some lenders will go on to report the activity on the credit card account to the credit reports of both the primary account holder and any authorized users. If you can become an authorized user on the account of someone like a parent, guardian, or spouse, their good behavior with that credit card can show up on your report and start to boost your score.

The bottom line: Personal loans and other financial products can boost credit

If you want to improve your credit score in 2026, a personal loan can be a good way to do it. The right loan will give you the chance to build your payment history and may help you improve other aspects of your credit profile, such as your credit utilization ratio. Be sure to consider other options, such as secured credit cards, and before applying for any loan, take a close look at your finances to make sure you can afford the payment. Carefully consider your options so you’re sure you’re making a choice that aligns with your financial goals.

If you’re ready to explore personal loan options, you can see what you qualify for with Rocket Loans℠ today.