How different loans can have different impact on your credit score?
Posted by eightyeightinc on February 5, 2008
Did you know that various loans and lender provide different values to credit? One lender from another can have a positive or negative impact on your credit. How do you know what lender are good and which ones are bad?
Limiting our credit to one type of loan can hurt our credit while having a variety of loans can improve our credit. Their are several types of lenders that we can use to develop our credit file.
Four main types of loans
- Real Estate – Mortgages or Equity loans.
- Installment – Auto loan, Education loan, Personal loan.
- Revolving- Credit cards, Personal lines of credit, Overdraft lines.
- Other/Collection- Collection companies and Attorneys.
Finding the right lenders with the proper mix of installment and revolving loans is essential to achieve the greatest value with our credit score. Even with the quality payment history, failing to find the right mixture will limit our ability to improve our credit.
Loans with finance companies can drop our score. Many finance companies are lenders used by auto dealers and retail stores for their on-site lending. Finance companies also offer home equity, personal loans, and credit cards. Stay away from these types of loans.
Obviously having a collection account can have a huge negative impact on your credit score. If you have any collection account negotiate with them to only agree to pay them off if they remove themselves from your credit file. Also the collection companies will negotiate the pay off amount. Be careful because if you don’t negotiate to have them remove them from your credit file they will be around for up to seven years.
As a general guideline those lenders with tighter requirements provide more value to our credit scores.
We should maintain at least one installment loan and one revolving loan from a national bank. Credit scoring companies do not recognize Credit Unions as banks.
Following these tips will greatly increase your credit score over time.
For All Your Utah Real Estate Needs Contact
The Bronson Barber TEAM
801-712-1607
bronsonbarber@gmail.com
