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.

  • Can you reduce your question? The title is asking about credit, but the content of the question has a number of details on lending, leverage, and specific dollar amounts. Money.SE tries to focus questions on one specific, answerable question. I'll think about this on my break and see if I can suggest some edits. – Freiheit Mar 28 '18 at 14:23
  • @Freiheit Looking at it, you're right. My intentions [are] is the question. Really, what I'm asking is "How can I get better leverage for future, bigger loans?" with a lot of details on my plan in-between. I knew of some other ways but I was asking specifically about this. -- Any edits would be appreciated! – Jonathan C Mar 28 '18 at 14:25
  • Making financial transactions purely for the sale of improving your credit score is a waste of time. Your credit score isn't that important. Gaming the system isn't going to have a meaningful impact on it. – Glen Pierce Mar 28 '18 at 14:31
  • @GlenPierce I am neutral on gaming the system. I was trying to see if this is a point of view that can have some meaning. – Jonathan C Mar 28 '18 at 14:33
  • Your credit score goes up from activities besides taking on debt. Cell phones, internet services, utility bills, and more all contribute to your credit score. – Glen Pierce Mar 28 '18 at 14:37

Not really. Very little of your score is based on closed accounts. And having a lot of relatively new accounts lowers your Average Age of Accounts (AAoA) and pulls your scores down. The best way to pull your scores up is to have 3 credit cards, and one open loan. Keep a small balance reported on one card only. That formula will maximize your scores.

This is based on the FICO scoring method, in the US. I have no idea what is used in Europe.

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  • Great. Can you please give me more reading material on this? – Jonathan C Mar 28 '18 at 12:52
  • I can direct you to a site that is owned by Fair Isaac, the company that produces the FICO scoring algorithms - again I have no idea what is used in Europe. Have look around www.MyFICO.com – Norm Mar 28 '18 at 12:56
  • Coming back: undervalued answer. Understanding FICO and its metrics can, indeed, give you some good answers. It seems the biggest factor in your reputation is having a credit that you keep paying and this has to keep going for quite a few years, this way, the bank knows you're serious but your income also has to be adjusted for another loan, e.g: be able to pay it back to back with the old loan. – Jonathan C Mar 29 '18 at 13:45

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