How does an installment loan affect my credit score

How does an installment loan affect my credit score

An installment loans are little touch concept to under to wrap up. It is simple loan where you have to pay lend money back in certain installments or intervals like monthly or mid month payments. In your daily life you may see this including auto loans which often require 48 monthly evenly divided payment, student loan, mortgage, equity loans and many others.

How it affect credit score

Installment loans get reported by to credit agencies. These agencies will gather credit information of the consumer and bring together it into their credit report that will help the potential lender in understanding your credit history quickly and easily.

Why it affects credit score

When you pay back all your installments of loan correctly, your credit score in not going to go up compared to paying off your credit card. It is because there are certain reasons behind it:


installment loan


  • Risk prediction is what lot goes into once credit score. So when wants to know whether you probably can pay off your loan or you can fall off.
  • Installment loan comes with different risk prediction features than credit cards.
  • Installment loans are more of regular and you will definitely pay off because it can be backed by some equity or collateral security on behalf of borrowing.
  • Credit cards are less stable. The consumers make variety of purchase using credit cards and also there is no added incentive wanting to keep back their collateral.

After effects on installment loans on credit score is not that great to begin because usually there is not much chance that loan is not paid back as per agreement. So that make sense that  when you are paying off the loan, credit score is not going to get skyrocket.



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