Adverse action notice letters contain “reason codes”, which are used by creditors when a consumer’s credit application is denied. Creditors must provide up to four reason codes when a credit application is rejected, the reasons must be based on the merits of an applicants credit report.
What Does Lack Of Recent Installment Loan Information Mean?
“Lack of recent installment loan information” is one type of reason code a creditor might use to justify denying a credit application. It is used for one of two reasons: either an account has not been active for some time (approximately 2 years), or there is no record that you have had an installment loan account.
How Can Installment Loans Impact Your Credit Score?
Instalment loans can be beneficial to building a good credit score if the installments are paid on time. Your payment history influences your credit score; so having one account that you pay in full and on time can increase your credit score. A high credit score indicates to creditors that you are a “low risk”.
What Loan Accounts Are Considered “Recent Installment Loan Information”?
Any loan with a fixed payment amount and repayment period can be considered for recent installment loan information, such as a car loan.
Creditors include reason codes in adverse action letters to people whose credit applications where denied because of the information in their credit report. A “lack of recent installment loan” is one of the reasons codes creditors use to explain a failed application.