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Having bad credit can make you feel trapped in a never-ending cycle of rejections and poor lending options. However, taking out loans for bad credit from alternative online lenders can actually help rebuild your credit over time - if you use them responsibly. Here are some tips for improving your credit scores while repaying bad credit loans. How Repaying Loans for Bad Credit Impacts Your Credit Scores Many online lenders offering personal loans for bad credit borrowers report your monthly payment activity to the three major credit bureaus (Experian, Equifax, and TransUnion). This gives you an opportunity to rehabilitate your credit scores with a new track record of on-time loan payments. Your payment history is the biggest factor influencing your credit scores, accounting for about 35% of your FICO score calculations. Every on-time monthly payment can help outweigh past delinquencies and derogatory marks on your credit reports. As you make payments consistently, your credit scores will gradually trend upward over time. Tips for Rebuilding Credit With Bad Credit Loans To use loans for borrowers with bad credit as a credit repair tool, follow these guidelines: Seek Out Loans Designed for Credit Building: Not all bad credit lenders report payment histories to the credit bureaus. Specifically seek out online installment loan products that state they will report your monthly payment activity to all three major bureaus. Use a Longer Repayment Term: Loans with shorter 6-12 month repayment terms provide less opportunity to build positive payment history compared to longer loans. Consider taking out installment loans for bad credit with repayment windows around 3-5 years for optimal credit rebuilding. Make Payments More Than Once Per Month: While lenders only require one payment each month, splitting it into two half-payments can have a bigger positive impact. More frequent payments translate into more positive records being reported monthly. Aim For Manageable Monthly Payments: Stretching your loan amount out over a longer term and lower monthly payment reduces risk of missing payments due to cash flow issues. Never take out more than you can reasonably afford each month. Set Up Auto-pay From Your Bank Account: Setting up automated monthly payments directly from your bank account to the lender helps guarantee you'll never accidentally miss a due date or incur late fees. Pay Ahead When Possible: Making payments ahead of the monthly due dates shows up favorably on your credit report and helps pay off principal balances faster. Pay extra amounts whenever cash flow allows. Avoid Credit Checks: If Refinancing Once your scores have improved enough to qualify for better loan rates, try to refinance with your existing lender to avoid a new credit check, which can temporarily ding your scores. Other Strategies for Rebuilding Credit Simultaneously Using bad credit loans to build positive payment history should be just one part of an overall credit repair strategy. Incorporate these other tactics as well: Check Credit Reports for Errors: Credit repair starts by obtaining updated copies of your credit reports from all three bureaus. Pour over them carefully, disputing any inaccurate negative item or information listed via mail with documentation. Pay Down Revolving Balances: Your credit utilization ratio weighs heavily on your scores as well. Focus on paying down existing credit card balances to 30% or less of your total limits. Less existing debt will help improve utilization ratios. Try to Remove Collections Accounts: One of the most harmful negative items to your credit scores are unpaid collections accounts. See if any collectors allow pay-for-delete arrangements to remove collection entries if you pay or settle up. Apply for New Credit: Gradually You'll eventually want to apply for new credit cards or loan products as your scores improve - but go slowly. Too many inquiries or new accounts at once can be scored as credit-seeking behavior. Monitor Your Credit Frequently: Staying vigilant by monitoring all three credit reports makes it easier to oversee progress and dispute any new inaccurate negative items that could threaten your improvement efforts. Additional Tips for Optimal Credit Rebuilding Having a game plan outlined can help you maximize the credit scoring benefits of your repayment habits on installment loans for bad credit borrowers. Try implementing a few of these tips: Vary Your Credit Mix While installment loans help in the payment history category, mix in other forms of credit extended over time as well. This includes minor credit cards, secured cards, retail accounts, and credit-builder loans in addition to installment debt. Stick to a Debt Paydown Plan as you make progress rebuilding scores, maintain a debt paydown strategy so you aren't simply racking up new balances to offset old ones paid off. Financial discipline is key throughout the process. Avoid Overextending on New Credit While you'll graduate to requiring new credit accounts for continued credit building, don't go overboard. Lenders want to see restraint and low debt usage levels on new cards and loans that you open. Set a Calendar Reminder for First Payment Due Dates Many bad credit borrowers run into trouble by underestimating when that first payment is due on a new installment loan. Setting a phone alert for the early due date can prevent a derogatory from ever occurring. Be Realistic About Your Credit Repair Timeframe Don't get discouraged if you don't see considerable credit score improvements within the first few months of responsibly repaying bad credit loans and other accounts. Most experts suggest allowing 12-24 months for positive repayment histories to substantiate for a full scoring increase. Stay Patient and Celebrate Small Victories Credit rebuilding requires perseverance. Celebrate small wins like crossing over a new credit scoring threshold, even before hitting your target score goals. Positive progress is motivating momentum. Sticking with It Pays Off Big Over Time Rebuilding damaged credit back to a good standing is almost never an overnight process. It requires developing completely new positive financial habits and breaking old destructive cycles. If you've gotten approval for installment loans with bad credit, view them as a rare second chance at proving you can responsibly manage new credit extended to you. Treat the scheduled monthly payments as mandatory financial priorities that simply cannot be overlooked if your credit recovery is going to gain legitimate traction. In Conclusion As your credit scores gradually rise up from the depths into a good standing, you'll regain access to more competitive interest rates, higher credit limits, and loan amounts that were simply off-limits before. Stay patient and disciplined and wait for it to get better!