How much does a personal loan affect my credit score?
A new personal loan typically drops your credit score by 5-15 points short-term, then improves it over 6-18 months as on-time payments build positive history. The drop comes from the hard inquiry and the new account; the recovery comes from payment history and (for consolidation loans) reduced credit utilisation.
Context
The short-term drop happens because of two factors. First, the hard inquiry costs 3-7 points temporarily. Second, the new account lowers your average account age, which is one component of FICO's 15% 'length of credit history' factor.
The medium-term recovery and growth typically more than compensate. Each on-time payment builds your payment history, which is 35% of your score. If the loan was used to consolidate revolving credit-card debt, your credit utilisation ratio drops sharply, which can produce a 20-60 point increase within 90 days.
Long term, a successfully repaid personal loan stays on your credit report for 10 years after closure and continues to contribute positively to your length of credit history.
- Reviewed by
- Compliance Review
- Last reviewed
- May 22, 2026
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