Credit score reason codes explain the factors affecting your score most.
The code “Lack of Recent Installment Loan Information” means your consumer report is not diverse.
Your credit report is better if it shows you paid back different kinds of accounts, like revolving credit cards or loans with fixed monthly installments requiring collateral.
So, if you get this code, the best thing to do is clear.
Improve your credit score by taking out a small installment loan from a lender that reports to all three bureaus. Pay it back on time. Then, watch your score rise!
Credit Scoring Factors
Several weighted factors go into credit score calculations, including payment history, amounts owed, length of history, new credit, and credit mix.
The reason codes point to the most impactful factors you can work on to raise your score.
The credit mix factor explains 10% of your score. An “insufficient installment loan information” reason code would come from this category, which weighs the diversity of account types.
In court, people who know you from different parts of your life, like family, friends, neighbors, and work, give a fuller picture of who you are.
In the same way, credit reports look best when they show you paid back different kinds of accounts on time. This chart lists several combinations worth adding.
|Home Equity Line of Credit (HELOC)
Personal Line of Credit
Home Equity Loans
Payroll Allotment Loans
The lack of recent installment loan information is one of many reason codes a score might output explaining the most critical factors affecting the result.
- When a consumer checks their score for educational purposes
- After a lender denies an application or offers less favorable terms
The most common number of reason codes shown is five, listed from most to least impactful.
Types Of Installment Loans
The reason code “lack of recent installment loan information” could have one of two explanations for your credit score. However, the first is more likely than the second.
- A young adult has yet to establish a history with this account type
- Fixed monthly payments
- Fixed repayment period
- An older adult had payment information that aged off their report
Either way, you have a clear mandate to improve your score. Take out a secured or unsecured installment loan, and pay it back on time!
Your consumer report could have insufficient recent information about unsecured installment loans. Unsecured means you do not pledge collateral, making it easier to start.
Taking out an unsecured personal loan is the simplest way to seed your consumer report with current installment loan information. A personal loan features fixed monthly payments and repayment periods and does not require collateral.
Keep the requested amount small to make the monthly payment affordable. You want the lender to report positive data to the three consumer reporting agencies (Experian, Equifax, and TransUnion) for at least six months.
Unsecured student loans can populate your consumer report with recent installment loan information. Student loans do not require collateral and feature fixed monthly payments and repayment periods, with some flexibility.
Request a student loan by completing the Free Application for Federal Student Aid (FAFSA ®) form. Of course, you must enroll in a higher education program for this option to work.
Remember, most people defer student loan repayment until after graduation. Therefore, this option may not fill holes in your profile right away.
Buy-now-pay-later arrangements do nothing to overcome insufficient installment loan information, even though they feature fixed periodic payments over pre-defined periods.
Credit scores do not consider buy-now-pay-later transactions. The rating companies need more time to analyze the data on short repayment terms (under six months). Also, most lenders in this space do not report to the bureaus, making the datasets incomplete.
Your consumer report could lack recent payment information about secured installment loans. Secured means you pledge collateral (an asset) the lender can repossess should you default.
A secured auto loan is a viable way to add recent installment loan information to your consumer report. A car loan features fixed monthly payments and repayment periods and requires collateral (the value of your vehicle).
Buy an affordable vehicle. You want the auto lender to report positive data to the three consumer reporting agencies (Experian, Equifax, and TransUnion) for at least six months.
Taking out a mortgage is an expensive way to add recent installment loan information to your consumer report. A mortgage features fixed monthly payments and repayment periods and requires collateral (the value of your home).
Credit scores influence mortgage interest rates along with other lesser factors. A home is the most significant investment most families make, and interest charges drive affordability considerably.
In other words, add the non-mortgage installment loan information noted earlier to your consumer report six months before buying a home. Boost your credit scores to lower your interest rate and afford a nicer house!