Are installment loans viewed differently from revolving loans?

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When applying for a mortgage, do lenders view your installment loans (car payment) differently than your revolving loans (credit cards)? How does the credit bureau view it when determining your score?

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    April 30, 2011 at 12:03 am

    Yes, installment loans are different from revolving loans. With an installment loan, there is a set date that the loan will be paid off and closed. A revolving loan you can pay down and charge back up forever.

    Mortgage companies look first at your total debt. Then at the type of debt your have. If you have $ 50K in debt but only $ 2K is credit cards and the rest is vehicles, (cars, boats, RV) it’s not going to be viewed the same as someone with $ 50K in debt where $ 30K of it is unsecured revolving debt.

    As for the credit bureau, they score based on total debt and payment history. If you have a lot of credit cards that are opened, but have no balance that can be a negative. Late payments are negatives. Lots of unsecured debt is usually a negative.

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