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I had been facing very big issue of bad credit score of mine. I was not able take any credit cards and I was constantly kept applying for new credit from different sources. It took my credit score further down.

But somehow I got one low interest loan from a source(an NBFC) and its 70% more then the amount I needed for a medical emergency. Now It is a good chance to rebuild the credit score again by repaying this loan on time as its my first credit ever taken, But I was wondering weather

1) Is it a good idea to invest this surplus money so that I can keep getting at-least EMI in return? (EMI is 8% of Principal amount)

or

2) Just repay the amount as fast I can (I can repay as early as in Three Months) and saves the interest going to be charged, But then I am not sure what effect it will have on my credit score.

or

3) Keep spending this amount on necessity, and repay the amount using EMI from the monthly salary.(I have to contribute 20% of salary for EMI)

EMI = Easy Monthly Installments

Note: I know that taking loan for investment is not at all advisable, but just to increase the credit score I have to go this long way. I am new to investing, new to credit and I have stable paying job.

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    So borrowing caused you to have a "bad" credit score, so you want to improve it by borrowing? Say that out loud a few times and see if it still makes sense. – Pete B. Nov 12 '18 at 15:36
  • no borrowing has not caused me "bad" credit score. It was lot of inquires done by various agencies that has bring my score down. Because of that I am not able to use my credit line in emergency. Actually Its first time I am able to borrow. – jaydeep marvaniya Nov 13 '18 at 6:36
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Is it a good idea to invest this surplus money so that I can keep getting at-least EMI in return? (EMI is 8% of Principal amount)

No. There is no risk-free investment that is guaranteed to earn 8% or more. Investments that earn 8% on average will have swings between +40% and -30% (using the S&P 500 as a benchmark). So there's a decent chance that your investment will lose money, and you'll still be on the hook for the 8% payment.

[Should I] Just repay the amount as fast I can (I can repay as early as in Three Months) and saves the interest going to be charged, But then I am not sure what effect it will have on my credit score.

Yes. There is no need to spend interest just to build up credit. Credit is like dignity - it takes a long time to earn but only a short time to lose. Just keep paying your bills on time, don't make ANY late payments, and your credit will build over time.

  • Ok I will repay amount in earliest time which is three month. This will improve my score to an average but its ok as further application will not be denied just because of NA credit score. – jaydeep marvaniya Nov 13 '18 at 6:39
  • @jaydeepmarvaniya Aim not to need to make "further application". If you can afford to pay this loan off, do so, then put the money your were paying aside in a savings account. Once that's built up to a sufficient level for an "emergency fund", you can either carry on saving or consider investing it in something like an tracker fund. – TripeHound Nov 13 '18 at 10:16
  • It should be mentioned: a credit score is simply a number measuring how much some company trusts you to pay your bills. Worry less about that number and more about borrowing responsibly; most scoring models are designed to improve as you demonstrate good habits. – cHao Nov 13 '18 at 19:56

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