Taking out a small personal loan can not only be a great way to cover unexpected expenses (like a medical emergency or home repair), but it can also be a mechanism for building up your credit score. With the right habits, the right loan, and the right mindset, you can show lenders that you are a worthy borrower, because you pay off your debts on time and in full.

Personal loans can help your credit, but it’s important to first understand the factors that make up your credit score. For FICO, payment history (35%) and amounts owed (30%) make up the biggest chunk of your overall score. Factors that are still important but weighted less heavily are length of credit history (15%), new credit (10%), and credit mix (10%).

On the other hand, VantageScore 4.0 uses payment history (41%), utilization (20%), age/mix of credit (20%), new credit (11%), balances (6%) and available credit (2%) to create your score. Since credit mix is weighted more heavily with your VantageScore, you might expect to see a higher increase here with the addition of a personal loan.

Personal loans can boost your credit score by lowering your credit utilization and diversifying your debt types. We’ll outline how to appropriately use a personal loan to ensure your credit score isn’t negatively affected.

One of the best aspects about applying for an online personal loan with Helix is that we check all of our borrower’s credit reports, so you know you’re working with a legitimate lender. As a lending institution, we report to Clarity Services, an alternative credit bureau owned by Experian. As with all reputable lenders, you will see a credit pull on your credit report from submitting an application. This is called a hard pull. It will be reported to all three major credit bureaus (Experian, TransUnion, Equifax). This offers people a safe and legitimate option if they need money fast.

Keep in mind that applying with a legitimate personal loan lender will always result in a hard inquiry that will affect your FICO score, but a single hard inquiry typically only lasts a few months. If you’re applying to multiple vendors, do so within the timeframe of one week to prevent your score from dipping too much.

Without healthy spending habits in place, a personal loan might actually do more harm to your credit score than good. When you take out a personal loan, you’re signing on for additional debt. If this new debt is being used to pay off higher-interest debt (such as a maxed-out credit card), just make sure that you stay within the limits of what you can afford.

Even though missing a due date by a few days won’t harm your credit score, being more than 30 days late on a payment can be reported to the credit bureaus. If you know you won’t have the money to pay back your loan on time, it’s better to avoid personal loans altogether.

At Helix, we believe non-prime (or “sub-prime”) borrowers should still have access to personal loans. Even if your credit score is below 670, Helix can provide personal loans to those with bad credit up to $4,000. To see if you qualify for what you’re needing to borrow at this time, submit an online personal loan application and see if you are approved within minutes.