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401(k) Loan's Impact on Credit Rating
Will a 401(k) loan appear on my credit report?
By Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance
February 10, 2005
Will a 401(k) loan appear on my credit report?
No. "The consumer is borrowing his or her own money, and the loans are not reported to the credit-reporting agencies," says David Rubinger, vice-president of communications for Equifax, one of the major credit bureaus.
Keep in mind, however, that such loans often are listed on paycheck stubs, which lenders generally request when you apply for a mortgage. In that case, the lender may count the loan as debt.
Also, you'll owe income taxes on the money and could get hit with a 10% early withdrawal penalty if you don't pay back the loan, which often becomes due if you leave your job. For more information, see Tapping Your 401(k) for Cash.
For more information about what you can do to improve your credit record and credit score, see theMy Fico consumer education site, from Fair Isaac, the company that provides credit scores to many lenders. You also will find a lot of helpful information about credit reports -- and services to help keep track of your credit record and score -- at the three major credit bureaus' Web sites: Experian, Equifax, and Trans Union.
And thanks to a new law, everyone in the United States now can receive one free copy of their credit report every year. See my column and the annual credit report Web site for more information and the timeline for availability (based on your region of the country).