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Installment Loans and Improving Credit History/Score

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Anonymous
Not applicable

Installment Loans and Improving Credit History/Score

Hi!  This is my first time on this board (so be gentle.... haha!).  My husband is Canadian and has been in the US for 3 years.  He has perfect credit (and had perfect credit in Canada), but his score is only 705... we think due to short history in the US.  Plus he only carries AMEX which I understand is not really helpful in terms of credit reporting.  Anyway, we want to improve his score so we can get a great mortgage rate in the next 6 - 12 mos.  Mortgage will be in his name only since
1) I am not working and have no income, and
2) I am rebuilding my credit after abusing credit cards in college (my score is up to 700 now but some negative records have not fallen off yet). 
 
Despite being able to pay cash, we recently financed a car through Toyota in order to
1) build his credit, and
2) take advantage of a rebate that was only available through financing. 
Our intention was to pay it off right away.  The customer service rep at Toyota Finance said that if we pay off right away there will be no improvement to his credit score and we should keep the account open for at least 6 months.  Of course I am somewhat skeptical since Toyota stands to make $$ on interest the longer we keep the account open.  Can anyone advise at what point to pay off the loan in order to benefit his credit record?  Also, would the same hold true for student loans?  Hubby just finished grad school and will start having to pay back student loan (only about $4,000) in November.
Message 1 of 8
7 REPLIES 7
jschaffer
Regular Contributor

Re: Installment Loans and Improving Credit History/Score

In this case the Toyota person is actually kinda right. 6 months of good payment history never hurts your score, and DOES help it. 12 months is even better, and of course 24 months and higher is even better (but probably unnecessary), but after reaching one of these milestones (your choice) I totally suggest paying off in full if you can. At this point the credit line will already have done what you wanted it to do and you no longer need to let money get sucked up to interest.

This positive report will stay on your record for 7 years, at which point he should be in a much better score situation anyhow if you guys keep your current trend.
Message 2 of 8
Anonymous
Not applicable

Re: Installment Loans and Improving Credit History/Score

First, 700 and 705 are good scores. The aren't excellent but they are very good. In order to improve not only yours and his credit, I would ask the lender if you could still jointly finance it- even w/o you working and write letters of explanation as to why in the past your credit was not good. I had to do that w/ my first house.
 
Reason I say MAYBE you want to pursue it in joint- is because his credit will go up over the years, but because you do not have a mortgage listed on yours it may only bump up periodically. Fico likes to see a mix of loans, CC, mortgage, auto, etc. If all you have is CC you may actually lose a little bump.
 
2nd- I would agree w/ the six mos and no more. Six mos is good enough to establish some credit history of consistent payments and then you will save a ton on interest. You could even make over the minimum payment for a little longer if perhaps you wanted to stretch to nine mos- but just figure out what those extra three months of payments would have been and spread them out.
 
Third, get all THREE C R's and scrutinize for the tiniest error on both you and DH reports. You may be suprised to get rid of an error or two - which will bring it a little higher.
 
Then read credit scoring 101 in freq. requested threads and AWAY YOU GO!!  Ask ask ask- read read read. Smiley Happy
Message 3 of 8
Anonymous
Not applicable

Re: Installment Loans and Improving Credit History/Score

Finally- showing Amex is good. It depends on the TYPE that sometimes is better than the other. There are Amex Charge Cards- that you PIF each month- they are still considered good credit as you must have good credit in order to get them. 2nd is Amex Credit Cards- which report like any credit card.
Message 4 of 8
jschaffer
Regular Contributor

Re: Installment Loans and Improving Credit History/Score



@Anonymous wrote:
*snip*
2nd- I would agree w/ the six mos and no more. Six mos is good enough to establish some credit history of consistent payments and then you will save a ton on interest. You could even make over the minimum payment for a little longer if perhaps you wanted to stretch to nine mos- but just figure out what those extra three months of payments would have been and spread them out.





I 2nd that. If I had the cash to do it, I would also PIF at the 6 month mark.
Message 5 of 8
MidnightVoice
Super Contributor

Re: Installment Loans and Improving Credit History/Score

Unless it is zero % financing  Smiley Very Happy
The slide from grace is really more like gliding
And I've found the trick is not to stop the sliding
But to find a graceful way of staying slid
Message 6 of 8
jschaffer
Regular Contributor

Re: Installment Loans and Improving Credit History/Score



@MidnightVoice wrote:
Unless it is zero % financing Smiley Very Happy





@MidnightVoice wrote:
Unless it is zero % financing Smiley Very Happy



True, in which case I'd probably do a full 36 months.
Message 7 of 8
Anonymous
Not applicable

Re: Installment Loans and Improving Credit History/Score



@jschaffer wrote:


@MidnightVoice wrote:
Unless it is zero % financing Smiley Very Happy





@MidnightVoice wrote:
Unless it is zero % financing Smiley Very Happy



True, in which case I'd probably do a full 36 months.

Oh yes- 100% agreed! If 0 percent financing for the entire 36 mos- then just set up on auto pay. I still think a max of one year would help though.
Message 8 of 8
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