Does Having Loans Open Impact Your Credit Score?

Last updated on January 8th, 2026 at 01:06 pm

Home » Does Having Loans Open Impact Your Credit Score?

Estimated reading time: 5 minutes

Having loans open does impact your credit score because lenders see multiple active credit accounts as a sign that you rely on borrowing. Even when you pay everything on time, several open loans increase your overall credit exposure, which can lower your score and reduce your chances of being approved for new credit. 

MoneyHelper explains how borrowing behaviour affects your score and why lenders look closely at the amount of debt you already have.

A single personal loan or credit card is typical, but when your report shows several loans at once – including car finance, instalment loans or payday loans – lenders may view this as a sign of strain. Experian also outlines how open credit accounts influence your credit score and what lenders consider high risk.

Below, we break down how many loans are too many, why open credit affects your score, and what you can do to improve your rating.

How Many Open Loans Will Impact Your Credit Score?

Your credit score starts to fall when you have several loans open at the same time, even if they’re all being repaid on schedule. One or two credit accounts is normal for most people, such as a credit card and a car finance agreement or a credit card and a personal loan. Lenders expect to see this, and it rarely causes concern.

The issue arises when your credit file shows multiple personal loans or short-term loans running alongside car finance, credit cards and buy now pay later agreements. This pattern suggests higher reliance on borrowing and leaves less disposable income for unexpected costs. Even if every payment is up to date, lenders still see multiple open loans as a greater risk, which results in a lower credit score.

The number of loans matters, but so does the size of those loans, your overall debt balance and how much of your available credit you’re using each month.

Why Does Having Loans Open Affect Your Credit Score?

Having loans open affects your credit score because lenders use your credit file to assess how stretched your finances might be. The more debt you already have, the less flexibility you have if your circumstances change. Even well-managed borrowing reduces your available income, and your score adjusts to reflect that.

Open loans also raise your debt-to-income ratio. If a large portion of your monthly income already goes toward repayments, lenders judge you as more likely to struggle with extra credit. Until those loans are repaid and marked as closed, they continue to influence your overall risk profile.

Another factor is credit utilisation. If your credit cards are close to their limits, or if you regularly top up loans or use short-term credit, lenders may feel you are stretched, which keeps your score lower than it could be.

Does The Type Of Loan You Have Affect Your Credit Score?

The type of loan you have does affect your credit score because lenders judge some forms of borrowing as higher risk than others. Long-term loans such as mortgages or standard personal loans tend to be seen as more stable because repayments are predictable and the lender has already carried out thorough affordability checks. 

Short-term loans, payday loans, or multiple buy now pay later agreements can carry more weight on your credit file because they suggest frequent reliance on credit and a greater chance of repayment problems. Even if you manage every loan well, a credit file filled with high-cost or short-term borrowing can pull your score down more quickly than a single long-term loan.

How Can I Improve My Credit Score?

You can improve your credit score by gradually reducing your debts, paying everything on time and showing lenders that you can manage borrowing responsibly. Improving a score isn’t instant, but small changes build quickly when you make them consistently.

Here are practical steps that help:

• Clear your debts where possible, either by paying them off directly or using a debt consolidation loan to simplify repayments
• Pay down debts gradually while maintaining a perfect repayment record
• Join the electoral roll at your current address so lenders can verify your identity
• Remove any financial associations with someone who has a poor credit score
• Keep your credit card balances low, ideally below 30 percent of your limit
• Avoid making too many credit applications in a short space of time
• Keep older accounts open if they are well-managed, as they help build credit history

Most people begin to see improvements within a few months once their borrowing starts to decrease.

If I Pay Off All My Loans, Will My Credit Score Go Back To Normal?

If you pay off all your loans, your credit score will usually rise because your credit file shows fewer debts, lower risk and more available income. Credit scores update in real time based on your behaviour, so clearing debt is one of the fastest ways to increase your score.

The improvement might not be immediate. Lenders need time to report your updated balances, and credit reference agencies need time to update your score. After a few months, your credit file should show that those accounts are settled, which makes you a far more appealing borrower.

Once your debt level drops and your repayment history stays strong, your score can return to its previous level or even surpass it.

Open loans don’t automatically damage your credit score, but having several at once can bring it down and make borrowing more expensive. Lenders assess how much debt you already have and how well you manage it, and they adjust your credit score to reflect your overall risk. Reducing your debts, building positive habits and keeping your credit usage under control are the most effective ways to strengthen your credit score and improve your chances of being approved for future borrowing.