Does Lending Club Affect Your Credit Score?

How Lending Club May Affect Your Credit Score

Getting a personal loan through Lending Club can impact your credit score. The effect, whether positive or negative, depends on how you manage the loan from application to final payment.

1. Checking Your Rate: When you first check your potential interest rate, Lending Club performs a soft credit inquiry. This initial step does not affect your credit score, allowing you to see offers without penalty.
2. Formal Application: If you proceed with a loan offer, a hard credit inquiry is required. This formal check is reported to credit bureaus and can cause a minor, temporary dip in your credit score.
3. New Account Impact: Once approved, the loan appears as a new installment account on your credit report. This can improve your credit mix but may also lower the average age of your credit history.
4. Payment History: Your monthly payments are reported to the credit bureaus. Making consistent, on-time payments builds a positive payment history, which is a major factor in boosting your credit score over time.

How Much Will Lending Club Affect Your Credit Score?

Several factors determine how a Lending Club personal loan might impact your credit score. Here are the key elements to consider throughout the life of your loan.

• Hard Credit Inquiry: Applying for a loan triggers a hard inquiry on your credit report. This can cause a small, temporary dip in your score that typically recovers within a few months.
• Payment History: Consistently making on-time payments builds a positive payment history over the loan's term. This is a major factor that can help improve your credit score over time.
• Credit Mix and Age: A new installment loan can diversify your credit mix, which is a positive signal. However, it also lowers the average age of your accounts, which may have a slight negative impact initially.

How You Can Avoid Lending Club Affecting Your Credit Score

Check Your Rate First

Lending Club allows you to check your potential interest rate with a soft credit inquiry. This initial check does not impact your credit score. A hard inquiry, which can affect your score, only occurs if you decide to proceed and finalize the loan application.

Prioritize On-Time Payments

Once you accept a loan, your payment history is reported to credit bureaus. Consistently making on-time payments is crucial. Late or missed payments will negatively affect your credit score, so it's vital to manage your loan responsibly to maintain or improve your credit.

Ways to Improve Your Credit Score

Your credit score plays a huge role in your financial life, but it's not set in stone. According to a guide on proven methods, taking consistent, positive actions can lead to meaningful improvements, often within just a few months.

• Monitor your credit reports. Regularly check your reports from all three major bureaus—Experian, TransUnion, and Equifax—to spot and dispute any inaccuracies or signs of identity theft.
• Automate your bill payments. Your payment history is the single most important factor in your score, so setting up automatic payments is the easiest way to ensure you never miss a due date.
• Reduce your credit utilization. Aim to use less than 30% of your total available credit. You can achieve this by paying down balances or requesting a credit limit increase on existing cards.
• Become an authorized user. Being added to the credit card of someone with a strong payment history can help boost your own score, provided their account reports to all major bureaus.
• Diversify your credit mix. Lenders prefer to see that you can responsibly manage different types of credit, such as revolving credit (credit cards) and installment loans (auto, personal).
• Limit hard inquiries. Space out your credit applications to avoid the temporary score drop that comes with too many hard inquiries in a short period of time.

The Bottom Line

Applying for a Lending Club loan involves a soft inquiry that won't affect your credit. Accepting a loan offer, however, triggers a hard inquiry, which may temporarily lower your score.

Frequently Asked Questions

Does checking my rate with Lending Club affect my credit score?

No, checking your potential rate only requires a soft credit inquiry. This type of check does not impact your credit score at all.

Will accepting a Lending Club loan hurt my credit?

Accepting a loan triggers a hard credit inquiry, which can cause a small, temporary dip in your score. This is standard for any new credit line.

How can a Lending Club loan help my credit score?

Making consistent, on-time payments on your loan can improve your credit history. It can also help by diversifying your credit mix and lowering your credit utilization.