Originally posted by MetalFortress
Haven't had a loan before, so about loan payments...
1) Are they similar to credit cards, where I can pay a minimum, or pay more, or even pay it off all at once if I choose to?
2) If yes to above, would taking out small personal loans, and then using the loan money to repay the whole loan right away, be a valid way of boosting credit score?
The most important factor in your credit score is
time. Obviously, someone who's had credit for 1 year and never missed a payment will be getting much less favorable rates than a person who's had credit for 10 years and never missed a payment.
For loans, banks charge several fees. Origination fee, processing fee, early payoff fee, etc. You might only want to take a loan out for $500, but it will cost you around $50-75 just to have them process the loan. So far, you're getting $500 and having to put $550-575 back in. Then there's interest (this varies so we won't go into it). If you pay off your loan early (and most banks won't do anything under a 12-month) you're going to pay a penalty of another $50-75. Why, you ask? Why should you be punished for being responsible and paying your loan off early? I have no clue - my guess is that the bank is pissed that they aren't going to get their interest rate.
Get a credit card. Keep your balance low, never miss a payment (I recommend using their online payment methods... much easier), and take out a loan only if you really need it. Don't spend money you don't have unless you absolutely have to... It isn't going to have that much of an effect on your credit history unless you default... Another good idea might be to go into your bank and talk to someone about solid ways to build your credit history...
