topic Re: How does a defaulted 401k Loan hurt your credit and FICO score? in General Credit Topics

How does a defaulted 401k Loan hurt your credit and FICO score?

Anonymous — Wed, 26 Aug 2009 00:44:51 GMT

I changed jobs about a year ago. I took out a $7,000 loan against my 401k, of which $2,800 of it was unpaid when I changed jobs. I recently got a notice that this loan was in default, and a Form 1099 would be sent to file with my taxes next year.

How does this affect my credit and FICO score?

Will I have to pay taxes on the whole amount, or just the unpaid portion?

Re: How does a defaulted 401k Loan hurt your credit and FICO score?

haulingthescoreup — Wed, 26 Aug 2009 01:30:47 GMT

As for the FICO score issue, it should not appear on your credit reports, unless they place it with collections or seek a judgment against you. And if it's not on your credit reports, then it won't/ can't affect your FICO scores.

For the tax question, no idea --I'll leave that for others.

eta: added another scary scenario

Message Edited by haulingthescoreup on 08-25-2009 06:30 PM

Re: How does a defaulted 401k Loan hurt your credit and FICO score?

AndySoCal — Wed, 26 Aug 2009 05:14:11 GMT

A 401K loan in most cases you are borrowing a portion of 401K of your own balance. In a 401K loan you are the lender and the borrower. The same reason why the interest is not a tax write off either.