Denied for “Lack of Recent Installment Loan Information”? Here’s What It Means

Getting your credit application declined can be both annoying and stressful. But it’s a great opportunity to draw conclusions and start seeking solutions to make sure that you never get turned down ever again. 

“Lack of recent installment loan information” is a reason code a creditor would use in their adverse action notice letter to explain why your credit application got denied.

Key Takeaways 

• The “Lack of recent installment loan information” reason code means you haven't had an active installment loan reported to credit bureaus in the last 2 years. While not having one isn't inherently bad, having an installment loan can diversify your credit mix and improve your score.
• If denied for this reason, consider taking out a small installment loan to show consistent payments. Alternatively, you can increase your credit limit, dispute errors on your credit report, or use services like Experian Boost to build a positive payment history with utilities and rent.

What Does "Lack of Recent Installment Loan Information" Mean?

Lack of recent installment loan information means that you haven’t had an active installment loan that has been reported to one of the top 3 credit bureaus in the last 2 years. 

The absence of an installment loan account on the report indicates that you do not have a personal, educational, or any other loan that is paid back in monthly installments at the moment. That is not necessarily a bad thing.

You can have a good credit score even without taking out an installment loan, but the presence of such an account would show the creditor that you can keep an additional financial responsibility in good standing.

How Installment Loans Impact Credit Score

A credit score is grouped into five main categories: payment history, credit utilization or the amounts you owe, the age of the accounts on your credit report, new credit, and credit mix. So, let’s have a closer look at how any loan can affect your credit score.

• 35% of your FICO score is your payment history. This is the largest factor and as installment loans require regular payments, by making them on time, you’ll be able to enhance your score.
• The amounts you owe or your ‘credit utilization ratio’ is also an important input that accounts for 30% of your score. It is usually recommended to keep the credit utilization below 25%-30% (if you have, for example, $20,000 of available credit, you would have to make sure that the outstanding balances do not exceed about $6,000).
  When you take out an installment loan, it may temporarily lower your score as you’re increasing the 'amounts you owe' category. But as you get closer to paying off the loan, your score will slowly rise.
• Though your credit mix accounts for only 10% of the score, it can still play an important role in the creditor’s decision-making process.
  • An installment loan can help diversify the mix of accounts that are open in your name. Lenders like to see a variety of credit because it shows that you can easily manage different obligations that come with borrowing.
• 10% of your score is the new credit. If you apply for a loan or another credit product, the creditor might have to perform a loan credit check (a ‘hard inquiry’) that can make you temporarily lose a few points.

The higher your score, the lower the risk you would be considered by creditors. This means you would be more likely to qualify for a loan.

With that being said, some lenders are ready to consider all types of credit. With Simple Fast Loans, for example, a less-than-perfect score will not necessarily prevent you from qualifying for an installment loan. Even if your application has been denied by other lenders in the past, the company might still be able to help you get the money that you need.

Loan Accounts That Qualify as"Recent Installment Loan Information"

The word “recent” in this reason code typically means in the last 2 years. When it comes to the type of loan, any loan with a fixed payment amount that needs to be repaid within a specified period can be considered an installment loan.

If you make regular payments on a fixed-rate loan each month, your payment can also be called “an installment”. The main factors that would affect how much the payments would be are the total loan balance, the interest rate, and the agreed-on repayment period.

Some of the most common examples of an installment loan include:

• Auto loans
• Mortgages
• Student loans
• Signature installment loans

What To Do If I Receive This Denial

First, you'll want to review the information regarding the denial and verify its accuracy. Next, we recommend reviewing your current credit accounts and see if you can pay down any debt. This will help pave the way for taking out a small installment loan or any of the other options detailed below.

Ways to Improve Your Chance of Approval

If taking out an installment loan is not possible at this time, there are some other ways to improve your credit score and work around this specific denial. 

Increase Your Credit Limit

If the "amounts you owe" are above 30% and you don’t have the finances to pay down a part of your debt at the moment, asking for higher credit limits might be the way to go. 

All you would have to do is contact the bank that issued the credit card and ask for a higher limit (try to make sure that the expert would not perform a hard inquiry though).

Once the higher limit gets reported to the credit bureaus, your overall credit utilization will automatically drop. 

Take Out an Installment Loan

You may have just been declined for a loan, so why would you want to apply for another one? The reason you got denied is because the lender didn't see any recent installment loan payments on your account. A small installment loan that you can pay back quickly would be beneficial for showing consistent payments on this type of account.

Dispute Financial Errors

Did you know that one in five Americans has an error on at least one credit report? The chances that there is a mistake that is pulling down your score are quite high, so going through your reports would definitely be worth it.

Some of the most common errors include errors made to your identity information, incorrect number of opened accounts (a scammer might have taken out a loan in your name without you knowing), and inaccurate dates.

Get Credit for Rent and Utility Payments

Experian Boost is a convenient feature that might instantly help you increase your FICO score by giving you credit for on-time utility, rent, insurance, and even certain streaming service payments.

It might take you a few months to build a record of scheduled payments, but you wouldn’t have to spend your time actively thinking about this feature after the initial setup.

Additional Denial Codes To Know About

We've gathered up some more denial codes with similar meanings that you may see on your denial report.

Insufficient Installment Loan Information

When your credit report shows "insufficient installment loan information," it means there isn't enough data about your history with installment loans. This could be because you've never had one, or it's been a long time since your last one.

To address this, consider taking out a small personal loan or another type of installment loan. Make sure to make timely payments to establish a positive payment history. This not only diversifies your credit mix but also demonstrates your ability to manage different types of credit responsibly.

Too Few Accounts with Payments as Agreed

The "too few accounts are currently paid as agreed" reason code suggests that you may have late payments or unpaid accounts on your credit report, or you simply don't have enough credit accounts overall.

Lenders want to see that you can consistently make payments on time across multiple accounts. If you have a limited credit history or a history of missed payments, it can be perceived as a higher risk by creditors.

To address this, focus on making all your payments on time. If you have any outstanding balances or late payments, work on bringing those accounts current as soon as possible. 

Lack of Recent Bank/National Revolving Information

The "lack of recent bank/national revolving information" reason code indicates that you don't have any active credit card accounts or other revolving credit accounts reported to the credit bureaus in the last 2 years.

Revolving credit accounts, like credit cards, are crucial for showing your ability to manage credit and make payments on time. If you don't have any recent revolving credit activity, it may be seen as a lack of experience by lenders.

To address this, consider opening a new credit card account and using it responsibly. Make small purchases each month and pay off the balance in full to establish a positive payment history. 

Common Denial Reason Codes and What They Mean

Though there are dozens of credit score reason codes, some of them are a lot more common than others.

Here are a few popular FICO reason codes and the meanings behind them.

Being denied credit due to a lack of recent installment loan information can be a setback, but it's also an opportunity to take proactive steps toward improving your creditworthiness.

Whether you choose to diversify your credit mix with a loan, increase your credit limit, or dispute errors on your credit report, there are various strategies to enhance your credit score and increase your chances of qualifying for future credit applications. By understanding the reasons behind credit denials and taking action to address them, you can build a stronger financial foundation for the future.