@Anonymous wrote:@Revelate wrote:
This used to be the way to credit build back in the day, I don't know how it's fully scored currently and nobody so far offered a guess to my inquiry on benefit on a different forum here.Apparently, this is no longer the case. Revolving credit is the important scoring factor now. And, while FICO says that the different types of credit taken into consideration only counts for 10% of the score, the reason for "revolving credit" to be more predominant is, from what I understand, because of utilization. The ability to use revolving credit utilization to spike your credit score for maximum scoring points gives "credit cards" the leading edge.
Except all the truly expensive items in most of our lives: houses and cars, are both installment loans.
Absolutely revolving credit is the key to any credit-enhanced lender pull; however, when it comes to getting a mortgage underwritten for several hundreds of thousands of dollars potentially, having that installment loan history is going to be nothing but goodness. Even if the "diversity" factor only counts as 10% in the base model, we absolutely no basis to make that determination on either a mortgage or auto-enhanced pull.
I'm a firm believer that point-in-time credit scores are next to useless except for what the lender pulls... and further, virtually all lenders (major ones at least) have custom algorithms which are run in the course of the loan approval process which are going to factor elements in your report differently than the actual FICO score.
I can't speak for anyone else, but I know I'm putting lipstick on my pig (my credit score); however, if that helps me get a mortgage, or even a lower rate, I'm absolutely doing it. The OP in this situation is way ahead of me in terms of both score and prime cards, but why leave even 10% on the table if you can have it factored into your score? In this case I'll absolutely try to leverage the 10% if I can, and I'm not certain why anyone wouldn't desire this unless they're at the point where money no longer matters to them... that's definitely not me 
.
i used to use cash all the time, in school and after i graduated. i just started this whole credit card thing. apparently my parents tell me i'm screwed. but my parents said they would always get offered increases in credit and they always took it, never used it for anything, but took it none-the-less (granted it was a different lifetime and he had ties to small businesses)..........
i'm trying to save every bit possible.......no point, like you mention, in leaving ascertainable stuff on the table only to regret it later on a huge mortgage or in purchasing a car........
but i do need to slow down, catch my breath; even the "short" is long, in terms of time (e.g. 6 months????)
@i'm looking into the usaa options (cd + secured loan + savings account; ~1-2 years, $1000).......so i'd basically only pay the difference between (1) interest for the cd loan (maybe slightly less than 2%???, i have to call) and (2) interest from the savings account (currently @1.11% for 18 mo.), which would mean ~0.90% or $90, correct?
@Revelate wrote:Except all the truly expensive items in most of our lives: houses and cars, are both installment loans. Absolutely revolving credit is the key to any credit-enhanced lender pull; however, when it comes to getting a mortgage underwritten for several hundreds of thousands of dollars potentially, having that installment loan history is going to be nothing but goodness. Even if the "diversity" factor only counts as 10% in the base model, we absolutely no basis to make that determination on either a mortgage or auto-enhanced pull.
I'm a firm believer that point-in-time credit scores are next to useless except for what the lender pulls... and further, virtually all lenders (major ones at least) have custom algorithms which are run in the course of the loan approval process which are going to factor elements in your report differently than the actual FICO score.
I can't speak for anyone else, but I know I'm putting lipstick on my pig (my credit score); however, if that gets me a mortgage, I'm absolutely doing it. The OP in this situation is way ahead of me in terms of both score and prime cards, but why leave even 10% on the table if you can have it factored into your score? In this case I'll absolutely try to leverage the 10% if I can, and I'm not certain why anyone wouldn't desire this unless they're at the point where money no longer matters to them... that's definitely not me
@Anonymous wrote:i used to use cash all the time, in school and after i graduated. i just started this whole credit card thing. apparently my parents tell me i'm screwed. but my parents said they would always get offered increases in credit and they always took it, never used it for anything, but took it none-the-less (granted it was a different lifetime and he had ties to small businesses)..........
i'm trying to save every bit possible.......no point, like you mention, in leaving ascertainable stuff on the table only to regret it later on a huge mortgage or in purchasing a car........
but i do need to slow down, catch my breath; even the "short" is long, in terms of time (e.g. 6 months????)
@i'm looking into the usaa options (cd + secured loan + savings account; ~1-2 years, $1000).......so i'd basically only pay the difference between (1) interest for the cd loan (maybe slightly less than 2%???, i have to call) and (2) interest from the savings account (currently @1.11% for 18 mo.), which would mean ~0.90% or $90, correct?
I can save you a little time on this one since I talked to a USAA CSR the other day about this as they don't publish their secured CD loan product on their website anywhere: they explicitly set their loan rate on this particular product as 2% interest above what they're paying you on the CD. Unfortunately the CD minimum for a secured loan against it is $2500... their lower CD deposits can be used for secured credit cards, but you absolutely don't need those.
I'm going to try it regardless, probably will just write it for a 5 year CD in my case and pay a little more than the minimum payment every month. Edit: the payments I calculated aren't correct; however, on a 2% installment loan for 2500, the extra interest you'd pay would be 48 and change over the course of the first year. Payments would be somewhat higher of course, but you'd get the interest you accrue on the deposit when the CD comes to term offsetting any excesss interest over 2% that you paid over the course of the loan.
Only thing I don't know is if they mandate a specific CD type, but I'll find out once I actually get the funds over into the USAA checking account.
Your local credit unions may also offer something similar and perhaps easier / better, I know the Navy Federal Credit Union only has a minimum of around 1k for a similar secured loan against a CD; however, I think this is probably the least expensive, and least risky method of getting an installment loan trade line on your credit report, and it's guarunteed USAA will report the loan to the bureaus unlike some other places.
The only complaints I've ever heard about USAA have centered around their mortgage lending arm: everything else (insurance, banking) in my case has been top notch for decades.
I need to transfer funds to the account after my most recent deposit clears (today) and it's a few days on an ACH transfer so I can see about funding the CD and getting the loan processed on Tue/Wed next week. Then I get to wait till July/August I guess to see how it actually turns out .
DHsCredit: from what you wrote, your mortgage application was likely the easiest one your underwriter had to approve in the past several years.
You are the gold-plated elite that the OP (and myself as well, it's just a much longer walk in my case) are aspiring to: you automagically qualify for the best rate on everything with your scores. Getting to that point though, takes a willingness to work with, and within, the system. Just because you don't have those tradelines on your record currently, I can nearly guaruntee that those student and auto loans helped you in times past when it came to climbing the credit tree. I would actually be astounded if some, if not all, of the tradelines I suspect you have weren't established when those installment loans were on your report.
I'd also be willing to bet that anyone sophisticated enough to draw useful information from the report besides the basic plusses and minuses, probably has a good idea that those were on there at some point in time.
In my case it's a race into the 640-680 range where I can at least qualify for a mortgage and that's probably 12-24 months out. In the OP's case, I'm guessing it's to get as high as possible by the time grad school comes to an end. No installment loans on the report but sitting on an excellent set of cards, and an already good score to begin with... if the goal is to continue pushing credit score forward, go get an installment loan. That plus time as you stated, and I suspect the OP is going to be in a very good position indeed when the student portion of academia comes to an end.
DHsCredit: In your case though, your DH is AU on two of your spectacular trade-lines, that's non-trivial. Also, the OP might not have quite as long as you had to make a decision in his or her life (I know I don't), and I can assure you banks look at all sorts of things when deciding whether to loan you money or not, that are far more complex and in some cases inane than what loan types one has successfully carried to term in the past.
That all aside, it is an inescapable fact that what is currently published is a diversity of loan types counts for 10% of your overall score. Do you have to have it to reach the stratospheric levels you have, nope, you've proved that conclusively; however, if it cuts a year or two off that path, I'll reiterate an earlier point about risk management - in my case I'm betting in the time domain that it's faster to a few breakpoints: 640, 680, 720, and 760 with installment loans than without. I've even gotten a number of rejection or justification letters that have on their reasons listed: not enough different loan types, or no installment loans on record.
The whole secret of credit is really to build it as early as possible, and then keep it clean from then on. Sure, eventually I could, or more likely the OP could, build their credit score to match yours possibly without getting any sort of installment loan before a mortgage, but how long would it take? What if the installment loan rebuckets the OP right out the gate into a pool where the score can climb higher to begin with: that's pure money in six months even let alone two years in their case.
I think in the end it just comes down to this: we buy insurance for all sorts of things: houses, apartments, life, health, etc ad naseum against various types of financial disaster. We bet hundreds, or even thousands of dollars in some cases on these products every year: why would anyone in my, or the OP's situation, not bet less than $100 over two years, to have even a shot at savings thousands if not tens of thousands later on mortgage interest, the biggest pure expense we're ever going to have in our lives?
I didn't mean to turn this thread into an argument, and I profusely apologize to everyone for that.