Do Secure Loans Affect Credit?

Secured loans can affect credit – it depends if you mean your credit history or credit score.

A secure loan you take out may appear on your credit file/history/report (they’re all the same thing.) Whether your secured loan affects your credit score depends on many factors – including (but not limited to) whether you make payments on time.

When you take out a secured loan, many lenders will add a record of it to your credit file. This may reduce your credit score. However, if you make your loan payments on time, the long term effect on your credit score is usually positive.

If you default on your loan, a record will go on your credit file. Your credit score may be affected as a result.

• Having security on a loan means reduced risk for lenders – so lenders may not see your credit score as a decisive factor.
• Some lenders may only require a “soft” credit check at the application stage (which does not affect your credit score).
• If you have a bad credit score, secured loans for bad credit could be a suitable option.
• Some lenders perform a “hard” check for applications (which may affect your credit score).
• Applying with too many lenders at once who require “hard” checks could affect your credit score.
• All lenders must run a full “hard” credit check before approving the loan.
• Once the paperwork is complete, the secured loan may appear on your credit file.

Applying for a secured loan could appear on your credit file – if the lender you apply to conducts “hard” credit searches, and that lender reports to credit agencies.

If you apply for multiple loans at once (while looking for the best deal), your credit score may be impacted; so it’s better to spread out your applications, if possible.

A “soft” search is different. This is where the lender checks your credit file with no effect on your credit score.