Do All Installment Loans Report to Credit?

Almost every American at some point in time, will utilize installment loans. They come in many forms, such as auto, home, and personal loans. We get these loans by first applying and then having the lender check our credit score among other qualifications. This credit score is made up of how other lenders we have used in the past reported our payment history.

It is a rather important number that we should always be keeping an eye on. Your credit score generally determines the cost or interest rate you pay on the loan you take out. Should you end up with a bad credit score, you may not even qualify for a traditional loan. If that were the case you’d look for a bad credit loan as opposed to an installment loan. We know that your score is important but what you might not know is that your payment history from past or current loans makes up about 35% of your credit score. It’s arguably the single biggest factor of the score in terms of weight. Because of this, it’s important to understand which loans may or may not report to your credit report and how they affect it.

Lenders That Do Report

If you belong to a bank or credit union and have utilized their lending services before, you can almost guarantee that your installment loan is being reported the credit bureaus. Banks and Credit Unions decision making for these loans falls heavily onto your credit score. While they do take into account your collateral (for an auto or home loan) and income, your credit score is going to still be the guide for the bank when they look at approving or turning down your loan request. These types of institutions generally have credit tiers that arbitrarily set the terms for the loan.

Other personal loan lenders such as One Main Financial or Lending Club will also generally report all payment history to credit bureaus. These lenders are typically dedicated to only the personal loan segment, but still utilize similar indicators that a bank or credit union would.

Lenders That Don’t Report

If you utilize banks and similar services, your probably accustomed to having things report to your credit. Much of what was said above is likely not super new to you. However if you find yourself using “non-traditional” banking services or belong to the “under banked” population in this country, you may utilizing some installment loans that do not report to your credit report.

The vast majority of these loans would fall into the “payday” or short term loan categories. While installment loans are generally spaced out over a period of 6 – 12 months or more, there are quite a few lenders that provide terms even shorter than that. While at times they may be appropriate for your given situation, they often times aren’t going to help you when it comes to building your credit.

This is for one of two reasons. The first being that the lender isn’t able to report the loan to the credit bureaus because it may not meet some standards to do so. The second is often that the lender simply doesn’t care to. There are a great deal of online lenders that simply don’t care to go through the hassle to setup that process or may find that most of their borrowers don’t actually care for that feature.

The practice of not reporting payment history to credit bureaus is very common online. Many lenders, typically newer, do not even pull credit when they decide to approve or deny a loan. It is becoming increasingly common that lenders (even those that do pull credit) are starting to look at other factors to decide whether they should make a loan to you and at what cost.

A Few Things To Note

It is important to note that while these institutions do report to credit, they may not report to all three of the credit bureaus. Some lenders may only report to one and while that credit bureau can sometimes share that information with others, it can sometimes cause discrepancies in your credit report. Be sure to check your credit periodically for inconsistencies and errors.

While payment history is one of the largest factors that make up your credit score, it isn’t the only one. We did a more thorough breakdown in this post if you want to learn more about what goes into your score. Be sure to follow us on Our Facebook Page to see the latest informative posts.