Line of Credit

[Anonymous]

Hello Everyone!

I'm new to the forum and I have a question about LOCs (Lines of Credit) and Credit Rebuilding Loans, both of which are done with my credit union.

I opened a LOC last month with my credit union, mostly as a backup for emergencies and to also help with rebuilding my credit.

Per my credit union, the LOC will always remain on my account even if I never use it and I was wondering from a credit building stand point if it was best for me to use it occasionally and make the monthly payments or to just let it sit there and not touch it?

I had also opens up a credit rebuilding loan when I opend my account with them last year and did one for 6mos and always paid it on time and it reflects as paid and it did increase my credit score. Would it be beneficial to open another one to help boost my score more?

Thank you for any feedback in advance!

[Revelate]

A LOC is traditionally scored just like a credit card (Revolving account); I'd use it sparingly once every couple of months and potentially let it report a small balance if your CU doesn't update the bureaus otherwise.  Should check that, if it's happy reporting $0 every month, then use occasionally and just PIF.

It's beneficial to have open installment lines for your score, but a 6 month line isn't really that useful in the grand scheme of things: see if you can get a longer one with the CU, or do something like a share secured loan with Alliant (4 years at 2%, or 5 years at 3%) for $500.  Longer tradelines are better tradelines, and while I consider 6 months to be an absolute minimum, you can do better, and should if at all possible.

[Anonymous]

Revelate:

Thank you for your feedback, it is greatly appreciated.

When I opened the LOC I made sure that they do report to all three CRAs, and I have checked my report and it is showing on all three with a $0 balance (I only used it once for a small amount and then paid it off). I wanted to be responsible and only open a small one since it is for minor emergencies, so I opened one for $300. So would you suggest that I only use about 10% of it on ocassion to keep my utilization low?

I am conscidering doing anoher credit rebuilder loan with them for a longer lengeth of time. I like that all the money comes right back to me at the end of the loan, its a nice way to to save up for something and build your credit at the same time.

I will definately look into the CUs that you suggested and see if I can do something witht them.

[youdontkillmoney]

If I don't need my Personal line of credits, I use it every six months or two times a year to show activity so the bank does not close it, for one of them if I use it once a year, the $25 annual fee is waived. So I use it. I may use a $100, then pay if off over a few months just to show a pattern of on time payments, then i'll pay it off. Sometimes I'll just pay in full after a month and not do minimum payments.

[Anonymous]

Good advice! Lucky for me my LOC will always be open until I choose to close it, whether its used or not and my CU doesn't charge me an annual fee. I guess I will just use it ocassionally like move $100 over and just make monthly payments to show steady payment history like you suggested.

[Revelate]

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@Anonymous wrote:

Good advice! Lucky for me my LOC will always be open until I choose to close it, whether its used or not and my CU doesn't charge me an annual fee. I guess I will just use it ocassionally like move $100 over and just make monthly payments to show steady payment history like you suggested.

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Different lenders will have different policies, the important one for FICO purposes is their updating of the bureaus: check a few months after $0 balances to see if the last update was within the past month, not all lenders / products report (my Amex Zync seemingly) if it's at $0.

Basically treat it the exact same way you do a credit card as far as FICO goes, and you'll be fine.  It should just be another revolving account, and your occasional use plan sounds peachy.