An installment loan is a loan in which you receive a specific amount from the lender. You then repay that amount, along with interest and perhaps other fees, with a set monthly payment amount over a period of time, usually a number of years. If you are paying the accounts on time every month and managing the debt well, the installment loan will likely have a positive effect on your credit scores.
When you open a new account, you may see an initial dip in your credit scores because there is uncertainty as to whether you will be able to manage the new debt and because there is no payment history associated with the loan.
As you begin to make payments on-time and show that you are responsible with the debt, your scores will increase.
Keep in mind that it takes three to six months of repayment history for an account to be included in your credit scores. So, you’ll need to allow some time before you start to see the positive effects of your good credit management.
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Scoped on: 1/21/2017