Wednesday, January 16, 2019

How Long Does an Installment Loan Stay on Your Credit Report

Installment loans seem like the light in the darkness when you’re short of money and you need a bigger amount for certain things. A lot of people nowadays seek the help of loans, as they encounter problems and they’re caught off guard in times when the wallet is crying.

If you’ve stumbled upon, you might find yourself wanting to borrow an installment loan. However, even if you’re certain that you’ll be able to pay off the installments on time, the question pops up – how long does it stay on the credit report? The answer to this question will be found in this article.

What Is an Installment Loan?

Installment loans are long term loans that require the borrower to pay off the amount through monthly installments over a set period of time. In other words, you don’t have to repay them in full at once – it will be done over the course of years.

Most of the time, the monthly payments are fixed, which make it easier for you to plan
ahead, considering the payment will always be the same. When it comes to variable-rate loans, the interest rate can change though, meaning the payment will change at the same time.

How Does an Installment Loan Affect the Credit Score?

Depending on how you handle the borrowing, an installment loan can have both a good and bad influence on your score.

One of the things that could affect your credit score is the length of the credit history.  It makes up a part of the rating, and considering installment loans are for longer terms, they can positively impact the score.

If you have a mix of credit forms that are financially under control and you apply for an installment loan, this could be viewed in a positive light. Conversely, if a lot of accounts are open, it could decrease the rating.

Taking a new loan could significantly decrease your credit. As such, if you apply for an installment loan, it will be listed on the credit score for a minimum of 3 years. This applies even if the loan is not approved.

Furthermore, as you probably expected, your credit score can take another hit too if you fail to make the payments on time. As long as you are always in time with your payments, the credit will be positively impacted.

How Long Does It Stay on the Credit Report?

The amount of time a loan stays on your report depends on whether you have been making payments at the right time. If you made late payments, it will stay on your file for up to 7 years. If you had a loan that went to a collection agency, it will usually be
listed on your file for up to 7 years.

In addition, if you have an overdue installment loan, it will remain on your file for up to 7 years, as it’s considered “not paid”. Moreover, if your installment loan has been fully paid, it will stay on your file for up to 10 years.

It’s essential to know everything there is to know about installment loans before you apply. Now that you know how long it will stay on your file for, you will know if applying for one is a good idea.
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