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- What is the best way to fix my credit? 3 answers
Relating to Europe, but an US-focused answer is also welcome.
I have a small stain on my credit history due to a tax issue. I am otherwise financially sound.
I am not big enough for a bank to give me loans for certain things. I had recently took a loan out to purchase a bulk of products that I later re-sold. The type of loan was "personal" and I only specified it was for personal needs. It was for 3 months and I paid it in 3 months.
I didn't need the loan; I simply wanted to see if the bank would approve a small-medium sized loan to me. The deal worked for me better because of the smaller risk posed by 3 payments instead of a bigger one.
After it was all done, it occurred to me that this could be used to boost my financial reputation in terms of someone who'd need a loan / credit later on.
Assume the numbers:
I take a loan for $10,000 for 12 months.
I'd have to pay $1,100 monthly for these 12 months. Instead, because I'm well off and just needed this to lessen my personal risk, I pay it all off in 3 months.
In my humble opinion, I just hopefully traded $1,100 now for trust and a bigger leverage in the future.
Does paying off such loans earlier than anticipated improve the metrics the bank would use to evaluate me for future loans?
As such, do these actions of paying upfront, paying full upfront help me in any way or measure to raise my trust within the system?
My end goal is to have the ability to take out larger or longer term loans in the future.