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Installment loan to boost score

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Revelate
Moderator Emeritus

Re: Installment loan to boost score

That may be true from an UW perspective, FICO doesn't care (generally) about historical balances though there's been some reports that a pattern of heavy utilization can bucket you.

 

You're well ahead of me on the average history bit, so you'll probably do better than where I am but I'd still suggest 800 is a stretch with comparitively recent lates.  We had one unconfirmed datapoint of a 790ish with a 90D near exclusion on solid history so it's possible but on 1.5 years old?  Well I'll believe it when I see it haha.  Also all of the simulators are the absolute suck when it comes to installment lines, they do them flatly wrong for modern algorithms. Not a big surprise there, people didn't believe installment utilization was a thing until roughly 2 years ago... to be fair it wasn't in FICO 04, and Beacon 5.0 was the common score people had access to for nearly a decade so I suppose that's not that surprising.

 

I guess end of the day if it gets you out of CC debt, fantastic, and I'm all for refinancing that crap down to a lower APR installment loan; however, don't expect the world with that 30/60 still in recent memory.




        
Message 11 of 18
Anonymous
Not applicable

Re: Installment loan to boost score


@Anonymous wrote:

 

Average age of Credit history: 8 years 6 months

 


I noticed earlier that one of the tools you are using for scores is Credit Karma.  Is that what you are using for that AAoA figure?  I ask because the front end summary page at Karma is inaccurate when it comes to AAoA.  (It ignores closed accounts.)

 

BTW, have you thought at all about whether you plan to obtain your actual FICO scores?  (I.e. rather than Vantage.)  To my mind that should be Step 1.  Discussions about what kind of score increase you might subseqently expect, and proposing various strategies, and so on, should come afterward.

Message 12 of 18
Anonymous
Not applicable

Re: Installment loan to boost score

So I got the FICO SCORE 8 reports, and I'm at 683 EX, 689 EQ, 697 TU.   Also, Experian.com (which is giving me the FICO 8 scores), is telling me that I will gain +35 points if I pay down all of my revolving CC debt, and it says I will lose 15 points if I open a personal loan.  Seems that their simulator may be more accurate than CC/NW!

Message 13 of 18
Anonymous
Not applicable

Re: Installment loan to boost score

A 35 point gain in going from 20-something percent aggregate utilization to single-digit utilization is much more realistic than a 70 point gain IMO.  Whatever simulator you were looking at previously that said there would be a 20 point difference between adding an auto loan verses a personal loan was flat out wrong.  Adding an installment loan is adding an installment loan with the exception of a mortgage which may be viewed differently than the other types.

 

Glad to hear you got your 3 scores from CCT and that you know your FICO 08s are in the high 600's.  This gives you a good, solid starting point to base your moves and score changes off of going forward.

Message 14 of 18
Anonymous
Not applicable

Re: Installment loan to boost score

Just an update for you guys... after my cards were all paid down, my score went up about 30-35 points, from high-600's to 725's.  This is with the new installment loan NOT reporting yet.

Message 15 of 18
rbentley
Established Contributor

Re: Installment loan to boost score

Theguyincharge.  Your last post in this thread was 1/2 year ago and you reported a 30-35 pt score increase, but your  installment loan had'nt reported yet.  Do you mind giving us an update as to what the net increase was after the loan started showing up?

Message 16 of 18
SouthJamaica
Mega Contributor

Re: Installment loan to boost score


wrote:

Hi,

I have 5 open credit cards, all in good standing. No other open accounts.  1 closed mortgage (paid off successfully after a few years by selling house).  1 closed CC.  4 closed "Other" (these were very short-term high APR loans from OppLoans.com (Opportunity Financial).  Current scores are around 730.    Current overall credit (all revolving) utiliziation is 21%.

I just signed up for the NerdWallet free account, and it is telling me the following tips for boosting my scores:

+80 points for Get a new auto loan with an amount of $10,000

+65 points for Get a new personal loan with an amount of $10,000

 

My objective is to boost my personal FICO scores as high as possible over the next few months, and then apply for a business loan of a substantial amount at LendingClub (they will do a personal credit check & personal guarantee requirement for this).  Basically, my personal credit score when I apply for the business loan can have a large impact on the deal I get for the business loan.  With this in mind, NerdWallet's recommendations seem very attractive.  Is it realistic that I stand to gain 80 points or 65 points by getting an auto loan or a personal loan (which I assume is an installment loan)?  I am looking at Upstart for the personal loan which would accomplish this for me; I've gotten preapproved by them for a reasonable rate.  So would it be a good plan of action to take out the personal installment loan, use that money to pay down my revolving utilization on CCs' to 0%, wait for a huge score boost, and THEN apply for the business loan?      On the other hand, counter to NerdWallet's recommendation, a BankRate.com article (http://www.bankrate.com/finance/credit/debt-consolidation-hurt-credit-rating.aspx) warns of the following:  "Moving the balances of your credit card accounts into an installment loan for purposes of consolidation may cause a slight drop in your credit score. The principal reason is you will have a new inquiry and huge installment loan appear on your credit report, even though you also will have much lower debt-to-credit ratios on your credit cards. The potential underwriting risk that you present to a new lender is measured in conjunction with your credit score and will now have to incorporate that you have the chance to begin adding to your credit card balances again. And the fact that many people do just that is why the action will temporarily cut your rating."

 

So which way do I go? :/     Does NerdWallet think I stand to gain so many points because right now the only type of accounts that I have are CC/revolving, and an auto/personal loan would diversify the account type mix?  Or are they expecting me to take that money and pay down my CC debt (I think this is NOT it, because as I increase the personal loan $ amount in the NerdWallet simulator, the forecasted point gain actually slighty GOES DOWN!)?

 

THANKS!!!


You're making a mistake by taking NerdWallet's advice seriously. It is baloney.  These sites (a) have nothing to do with FICO scores, and (b) make money from you clicking links and applying for things.

 

They are just selling you a bill of goods.

 

Go to the sites, learn what you can from them, but don't take their advice.

 

 


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 17 of 18
SouthJamaica
Mega Contributor

Re: Installment loan to boost score


wrote:
I should add my revolving util is 50% on 2 of my cards, and none on the rest. One of the cards has 0/39K usage... this is the one card which gives me such a high overall limit.

If you want to improve your scores, get those 50% cards down to 29% and then 9%.

 

 


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 18 of 18
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