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I need an installment loan...

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tempusfugit123
Frequent Contributor

I need an installment loan...

I've been asking around for CLI on all of my credit cards and the reason I'm being denied is due to not having an installment loan. Where can I get one? Everything I see seems like its a pay day loan. I'm just extremely confused about loans. I have been paying cash for school or using credit cards and immediately paying. Are student loans installment loans. What are the different types of installment loans? Thanks in advance =)

Message 1 of 29
28 REPLIES 28
jamie123
Valued Contributor

Re: I need an installment loan...

Installment loans are: Student loans, Auto loans, Mortgages. Personal loans, Shared secured loans and a few others.

 

If you are a sudent, your best bet might be in securing an student loan, otherwise you could get a shared secured loan. You really don't want to take out credit or a loan unless you really need it. Don't do it just to boost your scores.


Starting Score: EQ 653 6/21/12
Current Score: EQ 817 3/10/20 - EX 820 3/13/20 - TU 825 3/03/20
Message 2 of 29
tempusfugit123
Frequent Contributor

Re: I need an installment loan...

I understand what you're saying. I'm just trying to add a mix of accounts rather than credit cards so in the future I can prerpare for a mortgage. I have no student loans/auto loans on my credit report but I have several credit cards reporting. I just purchased my fico score and it says  because I don't have an installment loan that is why my score is low. It says : Although the credit inquiry associated with opening an installment loan may lower your score in the short term, you might consider opening an installment loan. Opening and responsibly managing an installment loan will demonstrate your ability to handle different types of credit.

 

I am being rejected for cli on my other accounts specifically because I don't have an installment loan. At first I thought it was ridiculous but now I understand that I have to have a mix of credit types in order to get a better score.

Message 3 of 29
mongstradamus
Super Contributor

Re: I need an installment loan...


@tempusfugit123 wrote:

I understand what you're saying. I'm just trying to add a mix of accounts rather than credit cards so in the future I can prerpare for a mortgage. I have no student loans/auto loans on my credit report but I have several credit cards reporting. I just purchased my fico score and it says  because I don't have an installment loan that is why my score is low. It says : Although the credit inquiry associated with opening an installment loan may lower your score in the short term, you might consider opening an installment loan. Opening and responsibly managing an installment loan will demonstrate your ability to handle different types of credit.

 

I am being rejected for cli on my other accounts specifically because I don't have an installment loan. At first I thought it was ridiculous but now I understand that I have to have a mix of credit types in order to get a better score.


Is there anything else on your credit report that's potentially causing you not to get CLI ?



EX Fico 804 11/16/16 Fako 800 Credit.com 11/16/16
EQ SW bank enhanced 11/16/16 839 CK fako 822 11/16/16
TU Fico discover 10/19/16 814 Fako 819 Creditkarma 11/16/16
Message 4 of 29
tempusfugit123
Frequent Contributor

Re: I need an installment loan...

No. When asking for a credit limit increase on 4 accounts especially my amazon store card it states in the denial only that I do not have any recent installment loan accounts. Ive tried for an increase ever 4 months now and thats all it states. Discover says the same thing.

Message 5 of 29
jamie123
Valued Contributor

Re: I need an installment loan...


@tempusfugit123 wrote:

I understand what you're saying. I'm just trying to add a mix of accounts rather than credit cards so in the future I can prerpare for a mortgage. I have no student loans/auto loans on my credit report but I have several credit cards reporting. I just purchased my fico score and it says  because I don't have an installment loan that is why my score is low. It says : Although the credit inquiry associated with opening an installment loan may lower your score in the short term, you might consider opening an installment loan. Opening and responsibly managing an installment loan will demonstrate your ability to handle different types of credit.

 

I am being rejected for cli on my other accounts specifically because I don't have an installment loan. At first I thought it was ridiculous but now I understand that I have to have a mix of credit types in order to get a better score.


I recently added two $500 shared secured loans to my reports for the same reason. Not having an installment loan history was the #2 reason as to why my scores were being held down across all my reports. Seeing as I can't do anything about the #1 reason I decided to work on #2.

 

A shared secured loan is where the funds in your savings account are used as collateral for the loan. It is by far and away the cheapest loan you can get. Total interest costs for a 4 year $500 loan is less than $30 right now. We are seeing that it is very important to have an OPEN installment loan on your reports if you want the best scores. So this is a cheap way to accomplish that goal. You want the longest term you can get.

 

Alliant Federal Credit Union and SDFCU (State Department Federal Credit Union) are two good places to get a shared secured loan and this is how it works:

 

1. Become a member and open a savings account. Fund your account with about $550. (The extra $50 is to ensure you have a bit of extra money to pay the loan interest.)

2. Wait about a week to 10 days for the funds to clear and your account to become active.

3. Apply for a $500 shared secured loan online using the $500 in the savings account as collateral.

4. They e-mail you your loan documents for your electronic signature using DocuSign.

5. Have the $500 loan deposited into the savings account. Your savings balance will then be $1050. (You can now withdraw $500 of the $1050 to use to fund the second account if you so desire.)

6. Set up automatic payments from the savings account to make the loan payments. At the end of the payback period you will have about $20 left in the account.

 

No HP for setting up the savings account. No HP for the shared secured loan.

 


Starting Score: EQ 653 6/21/12
Current Score: EQ 817 3/10/20 - EX 820 3/13/20 - TU 825 3/03/20
Message 6 of 29
tempusfugit123
Frequent Contributor

Re: I need an installment loan...

Wow.Thanks for your input Jaimie! I'll look into that because that is exactly what I need!

Message 7 of 29
Anonymous
Not applicable

Re: I need an installment loan...


@jamie123 wrote:

I recently added two $500 shared secured loans to my reports for the same reason. Not having an installment loan history was the #2 reason as to why my scores were being held down across all my reports. Seeing as I can't do anything about the #1 reason I decided to work on #2.

A shared secured loan is where the funds in your savings account are used as collateral for the loan. It is by far and away the cheapest loan you can get. Total interest costs for a 4 year $500 loan is less than $30 right now. We are seeing that it is very important to have an OPEN installment loan on your reports if you want the best scores. So this is a cheap way to accomplish that goal. You want the longest term you can get.

Alliant Federal Credit Union and SDFCU (State Department Federal Credit Union) are two good places to get a shared secured loan and this is how it works:

1. Become a member and open a savings account. Fund your account with about $550. (The extra $50 is to ensure you have a bit of extra money to pay the loan interest.)

2. Wait about a week to 10 days for the funds to clear and your account to become active.

3. Apply for a $500 shared secured loan online using the $500 in the savings account as collateral.

4. They e-mail you your loan documents for your electronic signature using DocuSign.

5. Have the $500 loan deposited into the savings account. Your savings balance will then be $1050. (You can now withdraw $500 of the $1050 to use to fund the second account if you so desire.)

6. Set up automatic payments from the savings account to make the loan payments. At the end of the payback period you will have about $20 left in the account.

No HP for setting up the savings account. No HP for the shared secured loan.


 

Having seen, first hand, the FICO scores of a friend of mine drop 35 points!!! when her only installment loan ended... I am not only considering opening mine, but I was contemplating following your specific path.  However, I am having second thoughts.

 

She won those 35 points, actually more than 35, along the whole year of the loan.  From what I remember of the FICO monitoring paperwork, the loan gained her more points toward the end of the loan.,  Actually, her score went down a little at the beginning of the loan and slowly started to rise.

 

My second thoughts are:  What if that happens with your four year loan?  Why not?  It wouldn't make much sense for you to get the 35 points the first year, just 25% into the loan and just coast for the next three years?  I don't think so.  I think that what would happen is that yes, you will delay the pain of the ending of a loan, by four years, BUT you will also delay BY THREE YEARS the larger score upswings of the latter states of the loan.

 

Make sense?  Any comments would be appreciated as I am not sure about this at all, but I believe I have some good, educated guesses (but, I could be totally wrong...)

 

Message 8 of 29
tempusfugit123
Frequent Contributor

Re: I need an installment loan...

Thanks for your input. I am in the dark when it comes to loans so any information anyone can gather would be helpful

Message 9 of 29
jamie123
Valued Contributor

Re: I need an installment loan...


@Anonymous wrote:

 

Having seen, first hand, the FICO scores of a friend of mine drop 35 points!!! when her only installment loan ended... I am not only considering opening mine, but I was contemplating following your specific path.  However, I am having second thoughts.

She won those 35 points, actually more than 35, along the whole year of the loan.  From what I remember of the FICO monitoring paperwork, the loan gained her more points toward the end of the loan.,  Actually, her score went down a little at the beginning of the loan and slowly started to rise.

My second thoughts are:  What if that happens with your four year loan?  Why not?  It wouldn't make much sense for you to get the 35 points the first year, just 25% into the loan and just coast for the next three years?  I don't think so.  I think that what would happen is that yes, you will delay the pain of the ending of a loan, by four years, BUT you will also delay BY THREE YEARS the larger score upswings of the latter states of the loan.

Make sense?  Any comments would be appreciated as I am not sure about this at all, but I believe I have some good, educated guesses (but, I could be totally wrong...)


You have some valid points and I don't have any rock solid proof to dispute your educated guesses but...

 

I did lose 5 points when my first $500 loan reported and didn't change when my second $500 loan reported a month later.

 

Things we know about installment loans:

 

1. Having a mix of credit on your reports is worth 10% of your score. (There is a running debate here as to how many points represent 10% of your score so I'm not going there at the moment.) If you only have revolving credit you are potentially leaving 10% of your points on the table. Your friend, like others, have seen score drops of 10 to 35 points after paying off installment loans. Those points are not all the points gained by having the loan. The closed loan on your reports also retains some points that probably slowly drop off over time so in your friend's case the loan might have been worth 45 to 60 points for all we know.

 

2. The only time most people notice a score impact caused by an installment loan is when they pay it off. People's scores can remain the same but usually drop at least 10 points or more when the loan is paid off. It seems that the higher the score is, the more points are lost at pay off time. This tells us that points earned for having an installment loan are earned slowly. So slow in fact that you can't isolate them from the normal ups and downs in a normal score. You can search far and wide and you won't find anyone ever stating, "I gained 5 points because my installment loan reached 50% paid off." One of the official FICO tips for high achievers is "A high achiever has an open installment loan with 37% of the principal paid off." Does that mean you get the most points at 37% pay-off? Not really, because they aren't saying that specifically but they are saying you need to be into the loan a bit and maybe not halfway. It is just a gut feeling really by a few of us that are trying to figure out the installment loan scoring scenario is that the points are earned very slowly month to month with most of the points or perhaps even all the points earned sometime in the first half of the loan's term. That's why you want a long term loan, so the sweet spot is longer. You could also get say, a four year term, and if you felt that your highest score will be when the loan is at 75% pay-off, you could pay the balance down to 25% a month before apping for a new car loan or mortgage because really, those are the only loans where a few extra points on your score will save you hundreds or thousands of dollars.

 

I mean, what if the FICO installment loan points worked like this:

 

No matter what the term of the loan, you gain all the points in the first 10 months. We don't know if that is true or false.

 

Typically, if you are worried about having the absolute highest score possible, you are planning on apping for an auto loan or mortgage. That is where having an installment loan on your reports will really benefit you in the long run. You can usually get your scores high enough to get any credit card you want by other means.


Starting Score: EQ 653 6/21/12
Current Score: EQ 817 3/10/20 - EX 820 3/13/20 - TU 825 3/03/20
Message 10 of 29
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