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Debt Adviser: Take out 401(k) loan to fix bad credit?

18.05.12

Dear Debt Adviser: More than five years ago, I became delinquent on my student loan. I was able to set up a repayment plan that I pay every month, and I have a balance of $6,700 as of today. Since I have been delinquent, my credit score has been low for these five years.

I don't foresee my credit score improving until the balance is paid off. I do not have any other debt except my car loan. Would it be a bad idea to get a loan from my 401(k) to pay the balance? I want my credit score to change because I want to buy a house. I can't wait another five years, until I pay the balance on my school loan, to buy a house. -- Joyce


Source: San Jose Mercury News