Lack Of Recent Installment Loan Information (On Credit Reports)

If you’ve ever had credit declined, you’ve also probably gotten a letter (known as an “adverse action notice”) outlining the reasons the creditor turned you down. This message might have stated something along the lines of “02-Level of account delinquency” or “Lack of recent installment account information.” And you may have questioned what on earth they were trying to say.

If a creditor utilized your credit score to reject your application, it must mention about four of these “reason codes” or “adverse action codes.” Some notifications merely list the claims.

Additionally, because they are more difficult to control, factors like your earnings or debt may influence the creditor’s decision to reject your application. However, knowing the reasons behind the current state of your credit score will assist you in figuring out how to raise it.

Lack Of Recent Installment Loans

A lack of recent installment loan information indicates that you haven’t reported an installment loan in the last two years. Installment loans include personal loans and several kinds of auto loans.

Let’s say that you don’t have any installment loans. This might contribute to the lack of diversity in your credit record. You may be missing out on some points by having a weaker “credit mix.” However, this is a relatively smaller factor compared to making your payments on time and keeping your credit usage low.

Lacking an installment account on your credit report denotes the absence of any personal, educational, mortgage, or auto loans at the time the credit report was pulled. Again, that’s not a bad thing. Installment accounts are not required for good credit; credit cards alone can result in a respectable rating. An installment account simply shows another type of financial responsibility if you can keep it in good standing.

What Is Meant By An Installment Loan?

As an example – you make regular payments on a fixed-rate mortgage every month. This payment is considered an “installment” because it gives you a lump sum, and fixed, scheduled payments are made until the loan is paid in full. Part of the loaned principal must be repaid, together with interest, as part of the monthly debt payment. The loan balance, interest rate, and repayment period are the three key variables that impact how much each regular mortgage payment will be. As we mentioned earlier, making on-time payments on this loan serves to establish your credit worthiness.

regular payments on a fixed-rate mortgage

Does A Lack of Recent Installment Affect Credit Scores?

Your payment history has the biggest impact on your credit score. Building credit can be aided by a solid track record of on-time payments – and that, of course, includes installment payments. However, payments that are overdue by 30 days could significantly lower your credit rating. When you lose your house or automobile due to foreclosures or repossession, it can have a significant impact on your credit score.

Another way installment loans affect your credit is their impact in your mix of credit. If you only have credit cards, you may see additional benefit to your credit score by adding an installment account. Showing creditors that you are dependable in paying down a loan adds to your credibility and helps your score.

If you ask for any type of credit product, a loan credit check could temporarily decrease your credit score. These investigations, also referred to as “hard inquiries,” are noted on your credit history.

How Else Can Installment Loans Increase Credit Scores?

It is usually not a smart idea to take out a loan to raise your credit score, but credit-builder loans are an exception. As their name says, their main goal is to build credit. These installment accounts are excellent for those with bad credit or with no credit.

The funds from a credit-builder loan will be put into a savings or certificate account after being authorized. Until your loan is repaid, you won’t be able to take out the funds.

Making on-time payments establishes a positive credit history and, whenever the loan is fully repaid, has emergency savings. Conversely, your credit score may suffer if you don’t make your loan payments on time. Borrowing excessively could also affect your finances and result in missing payments.

Installment Loans: Secured and Unsecured Loans

The collateral for installment loans might be secured or unsecured (non-collateralized). A loan is secured by the thing being purchased. For example, the car being bought serves as the collateral for an auto loan.

Private loans, usually referred to as installment loans, may be issued without security. Based on credibility, which is typically demonstrated by credit scores, lenders may grant loans without any collateral and the borrower’s capacity to pay back the loan as shown by their assets and income.

The interest rate in a secured loan is often lower than that of a non-secured loan. This is because the creditor is willing to take on a greater risk of non-payment.

What Loans Show Up As Installment Accounts on Your Credit?

Any loan with a set payment and a fixed term is eligible to be included in the most recent data on installment loans. A typical installment loan is one for an automobile. Secured or unsecured signature loans usually have fixed monthly payments for fixed terms and fixed loan amounts. In other words, with an installment loan, you receive a specific amount, repay it over time, and once you do, the loan is closed. This is much different than using a credit card, which allows for several payback methods.

The two most common installment loans are mortgages and auto loans.

auto loan, types of installment loans

What Types of Installment Loans Are Available?

Unsecured loans, often known as personal loans or signature loans, don’t need security and you can use the funds in any way you like.

Secured loans have an asset as collateral. Your home’s equity serves as collateral for mortgages, but there are substantial monthly payments and closing charges. The value of your automobile serves as collateral for car loans, which also demand a sizable down payment.

Although student loans are considered unsecured contracts, the majority of applicants postpone payment until just after graduating.

An installment loan, known as a “share secured” loan, is widely available from credit unions. That is perfect for a person who wishes to establish credit but might not be eligible for credit.

Think about the money you have in a “share account.” It is a savings account, as credit unions offer it. You will then be able to apply for a “share secured” loan. If you lend your own money, it still applies. After that, you gradually pay it back. Be aware that this loan carries interest. There is no doubt that it will exceed the interest you receive on your shared account. Payments that are past due will lower your credit score. However, provided you make the necessary payments, it’s seen as a reasonably priced loan that would help you improve your credit.

It’s important to mention that a new installment loan can temporarily lower your credit score. However, if you make all of your payments on time and in accordance with the terms, your rating will benefit you in the long run.

How To Improve Credit Fast

How To Improve Credit Fast

Here are a few ways to improve your credit fast.

Repay Credit Strategically

Your credit utilization is the fraction of your credit limits that you are frequently using. Use about 30% of your card’s credit, no more than that; the lower, the better. The top scorers employ less than 7%.

Since your credit score is declared by the balance when the card company presents it to the credit reporting agencies, you should make sure it is low. Paying down the balance prior to the conclusion of the billing cycle or making many payments all across the month to constantly keep your balance low are simple strategies to accomplish this.

Increase Your Credit Limit

Your average credit utilization immediately decreases when your credit card limit increases while your amount stays the same, which might help you build better credit. You have a good chance of receiving a bigger limit if your earnings have grown or if you have added additional years of good credit history.

Dispute Financial Errors

Your score may be lowered as a result of an error on one of the credit reports. You may immediately improve your credit by disputing inaccuracies on your credit report.
You can get a free credit report by any of the major credit agencies. You can order them at and then examine them for errors, such as a delayed payment that you made on time, your financial activity being intermingled with someone else’s, or unfavorable data that is too old to be included.

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