Editor's choice: OppLoans Installment Loans
- Easy online application
- Quick approval
- Fast funding
- Long repayment terms
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Taking out any type of loan can have a positive or negative impact on your credit report. Make all of your repayments on time and an installment loan can strengthen your credit rating. But late or missed repayments show up on your credit report for years, making it difficult to qualify for other types of financing.
If you’re applying for an installment loan, you might want to check your credit report first even if you haven’t ever missed a payment. Sometimes lenders make mistakes that can be easily fixed.
An installment loan is type of financing where you borrow a lump sum of money and pay it back over a period of time, usually between six and 60 months. Lenders typically charge both interest and fees on an installment loan, unlike the fixed fees that come with a payday loan. This type of loan is meant to help finance large purchases, such as buying a car.
How long an installment loan appears on your credit report depends on whether you currently have an installment loan and have been on time making payments.
Check the websites of any providers you’re interested in to confirm they operate in your state of residence.
An installment loan can help your credit score by allowing you to build a positive credit history. All you need to do is make your repayments on time.
A positive credit history shows that you’ve paid off debts on time in the past, making you appear more trustworthy to lenders in the future. It can boost your credit score in a few ways:
If your installment loan provider doesn’t report to a credit bureau, an installment loan can’t have any impact on your credit score at all. It can still hurt your credit score if it goes into collections — that gets reported to credit bureaus regardless of the lender.
There are a couple ways having an installment loan can hurt your credit:
If you find an error on your credit report, make sure that it’s showing up on all of your credit reports — not all bureaus are in contact with each other. Gather information showing that the report is incorrect before reaching out to your lenders.
Typically, lenders ask you to send documentation to prove there was an error. If they accept your claim, they’ll reach out to the credit bureau to correct the error.
On-time payments generally stay on your credit report for up to 10 years. Late payments, defaults and other negative marks often stay on your credit report for up to seven years.
Credit inquiries can stay on your credit report for between one and seven years, depending on where you live.
Applying for an installment loan always has an impact on your credit report. Whether it helps or hurts your credit rating depends on how you repay your loan. Pay it back on time and it can boost your score for up to 10 years.
But even missing a repayment by a few days can follow you around for up to seven years. You can learn more about how it all work by checking out our guide to short-term loans.
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