Will a secured loan help my credit score?
Does borrowing against your home actually strengthen your credit profile - or quietly harm it?
Related articles
Do Secured Loans Improve Your Credit Score?
Looking to boost your credit score? You're not alone. Many people consider secured loans a financial lifeline, one that could bring the added benefit of better credit. Are they right? Or is it a risky move that could backfire? Let's unravel the link between secured loans and credit scores, bust some myths, and give you the facts you need to make the smartest move.
Can secured loans build credit?
Secured loans - borrowing money against an asset like your home - can play a powerful role in shaping your credit profile. Here's how they can work in your favour:
- Payment history: Consistent, on-time payments are reported and show lenders you're reliable.
- Credit mix matters: Having a variety of credit types, like instalment loans and cards, can help.
- Lower credit use: You might use a secured loan to pay down debts, which can boost your score.
- Longer history: A long-term, well-managed secured loan adds depth to your credit profile.
But - and it's a big but - misuse the loan, and your score could suffer:
- Missed payments: Even one late payment can leave a mark.
- Repossession risk: Fall behind and your asset (like your home) could be at risk.
- Hard checks hurt: Applying for loans may temporarily lower your score due to hard searches.
What lenders actually check
Before handing you a secured loan, lenders aren't just glancing at your income. They go deep - and your credit score is only one piece of the puzzle. Here's what they look at:
- Your credit report: Are you reliable? Are there defaults, CCJs, or missed payments?
- Your asset's value: Especially for homeowner loans, lenders want to review your property's worth.
- Affordability checks: Can you actually make the monthly repayments without strain?
- Your existing debts: Lenders assess whether this loan would stretch you too thin.
- Loan-to-value ratio (LTV): How much are you borrowing compared to what your home is worth?
Summing up
A secured loan can absolutely help boost your credit score - but only if you manage it wisely. Consistent repayments and careful borrowing send strong signals to lenders. Miss payments, though, and you risk serious damage to your score - and even losing your asset. Understanding what lenders check can help you strengthen your application and build better credit - now and later.
Frequently Asked Questions: Secured Loans
Will my credit score go up immediately after taking a secured loan?
Not straight away. In fact, your score might dip slightly due to the hard credit check. But as you make regular, on-time repayments, your score can steadily rise. Secured loans help build a stronger credit profile - but only if they're managed responsibly and consistently over time.
Is a secured loan better than a credit card for credit building?
It depends on your financial habits. Secured loans offer fixed terms, regular payments, and less temptation to overspend. Credit cards can boost your score too, but they require a lot of discipline. If you're looking for stability and structure, a secured loan may be the safer, more predictable credit builder.
Can I get a secured loan with bad credit?
Yes, many lenders offer secured loans to people with poor credit, since the loan is backed by an asset. But the interest rates you're offered will likely be higher, and the terms stricter. It's important to compare lenders carefully and make sure repayments are comfortably affordable before moving forward.
Which is worse - missing a loan payment or credit card payment?
A missed secured loan payment is often worse - it not only affects your credit score but could eventually lead to repossession of your home or other asset. The stakes are higher. If you think you might miss a payment on your loan, contact your lender as early as possible to discuss your options.
Does paying off a secured loan early affect my score?
Paying off early might slightly reduce your credit age or mix, but that impact is minor. Most credit scoring models reward responsible repayment. The bigger concern is usually whether your lender charges early repayment fees - so check the terms before deciding to clear the loan early.
Articles that might interest you
What are secured loans good for?
Powerful ways people use secured loans - and some unexpected ways they could help you.
Secured Loans from Norton Home Loans | Flexible Homeowner Lending
Borrow £3,000 to £350,000 over 1–25 years, even with poor credit or non-standard income. Learn about Norton’s rates from ~9–10% APR, and up to 85% LTV.
Secured Loans from Selina Finance
Borrow from £10,000 to £500,000 over 5-30 years. See how their flexible loans let you borrow as needed against home equity.
The details shown are for illustration only and may not include all lenders or products. Actual rates and terms depend on your circumstances and the lender’s assessment. Information was correct at publication but may change at any time.
