Good for credit score to repay 401(k) loan?

Don TaylorDear Dr. Don,
I borrowed against the balance in my 401(k) plan. Does paying back the 401(k) loan improve my credit score?

-- Robert Rejuvenate

Dear Robert,
Sorry, the payments on a 401(k) loan aren't reported to the consumer reporting agencies, the credit bureaus that compile credit reports. It's the information in your credit report that is used to determine your credit score.

One of the advantages of borrowing from your 401(k) is that you don't have to have good credit to get the loan. You're borrowing your own money, so you're the lender. The downside is that the repayments you make to yourself don't help bolster your credit history, which would improve your credit score.

But it's not all bad news. Mortgage underwriting standards don't consider 401(k) plan loans as long-term debt, so a 401(k) loan won't affect your ability to finance or refinance a home loan.

Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.

Ask the adviser

To ask a question of Dr. Don, go to the "Ask the Experts" page and select one of these topics: "Financing a home," "Saving & Investing" or "Money." Read more Dr. Don columns for additional personal finance advice.

Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.


Editorial Disclaimer: The editorial content is not provided or commissioned by the credit card issuers. Opinions expressed here are author’s alone, not those of the credit card issuers, and have not been reviewed, approved or otherwise endorsed by the credit card issuers.

Show Bankrate's community sharing policy
          Connect with us
Product Rate Change Last week
Balance Transfer Cards 16.22% --0.00 16.22%
Cash Back Cards 16.49%  0.07 16.42%
Low Interest Cards 11.44%  0.09 11.35%
Credit cards on a table

Get advice for managing credit cards, building your credit history and improving your credit score. Delivered weekly.


Credit Card Blog

Mitch Strohm

Will card fraud increase at the pump?

Fraudsters may be taking advantage of the lack of security at pay-at-the-pump card readers.  ... Read more

Partner Center

Connect with us