Before we talk about the impact of a loan on your credit score, let’s discuss what credit scores actually measure in the first place. Credit is the culmination of your debt to income ratio, repayment history, credit length, current portfolio, and loan inquiries. Although there are many other factors that determine the final number, your score is primarily impacted by the above five elements. And almost a tenth of your score is controlled by a double-edged sword: new credit inquiries. Applying for any kind of loan will place a ‘hard inquiry’ on your credit report, which amounts to 10% of your total score. Each inquiry will reduce your score by roughly five points, although this number may be higher or lower depending on certain elements. As you shop around for a loan that meets your needs, hard inquiries can start to add up quickly. Within the span of a few weeks, your credit score may look significantly smaller than it did before. This is one of the reasons why it's so important to choose a loan you want ahead of time. Many Australians inadvertently damage their credit scores by putting in multiple loan applications, then just selecting the one they like the best once multiple outlets approve them. Thankfully, the story doesn’t end here. Hard inquiries only show on your credit report for two years, and stop impacting the score after just 12 months. Regular repayments will not start affecting your credit score right away, but it will certainly start making improvements within a year or less. If you are consistently paying the same amount each period and meeting every repayment deadline, your credit score may be able to dramatically increase. Some people have seen improvements of up to 100 points within 12 months, moving their score from fair to excellent. While your mileage may vary, long-term determination and consistency will dramatically elevate your current credit score.