A personal loan can be a great way to build or improve your credit score, but only if you use it wisely. Whether you're taking an instant loan for an emergency, home renovation, or any other need, managing it well can boost your financial health. However, poor handling can harm your credit instead. Here are six essential dos and don’ts to help you use a personal loan effectively.

The Dos of Building Credit with a Personal Loan

1. Make Timely Payments

One of the biggest factors in your credit score is your repayment history. Always pay your personal loan EMIs on time. Late or missed payments can negatively impact your credit score and make it harder to get loans in the future. Setting up automatic payments can help you stay on track.

2. Choose a Loan That Fits Your Budget

Before applying for an instant loan, calculate how much you can afford to repay each month. A loan that stretches your budget too much can lead to financial stress and possible missed payments, which will harm your credit score.