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Credit Builder Loan

Valued Contributor

Credit Builder Loan

   I am considering a credit builder loan to help my credit score. Do the terms of the loan change its affect on my credit score a lot? I am considering a 3000 dollar loan. Would it be more beneficial to make the loan terms over 1 year or 2 years?

Message 1 of 8
7 REPLIES
Senior Contributor

Re: Credit Builder Loan

I believe installment loans have very little affect on Fico scoring. Don't quote me tho!!!!!

Message 2 of 8
Moderator Emeritus

Re: Credit Builder Loan

Installment loans do factor into your scores, but the util of those loans aren't near what revolving are.  And to answer your other question, no the terms do not factor in.  Just your payment history.  So it doesn't matter how long the loan is for.

Starting Score: 504
July 2013 score:
EQ FICO 819, TU08 778, EX "806 lender pull 07/26/2013
Goal Score: All Scores 760+, Newest goal 800+
Take the myFICO Fitness Challenge

Current scores after adding $81K in CLs and 2 new cars since July 2013
EQ:809 TU 777 EX 790 Now it's just garden time!

June 2017 update: All scores over 820, just pure gardening now.
Message 3 of 8
Valued Contributor

Re: Credit Builder Loan


Shogun wrote:

 but the util of those loans aren't near what revolving are. 

What does this mean? That they don't affect score as significantly as revolving ones? If terms don't matter than I am just going to do a 500 dollar one for 6 months just to establish  a positive tradeline because I have never had an instalment loan before.

Message 4 of 8
Frequent Contributor

Re: Credit Builder Loan

What is the benefit of having one?
2/16/13 Scores EX: 594, TU:513, EQ:563 -- Cap One Secured: $200, Kay's: $400

GOAL #1: 625 -- CHECK!

3/31/15 Scores TU: 621 -- Cap One Secured: $750, Kay's: $900, CareCredit: $1000, Aerie $350, Fingerhut $1350

Goal #2: A travel card. REC ME!
Message 5 of 8
Epic Contributor

Re: Credit Builder Loan


dddewdrop wrote:

Shogun wrote:

 but the util of those loans aren't near what revolving are. 

What does this mean? That they don't affect score as significantly as revolving ones? If terms don't matter than I am just going to do a 500 dollar one for 6 months just to establish  a positive tradeline because I have never had an instalment loan before.


Installment utilization is probably 10% or less of your FICO score.

Message 6 of 8
Epic Contributor

Re: Credit Builder Loan

Message 7 of 8
Valued Contributor

Re: Credit Builder Loan

  Well even if instalment utilisation is only 10 percent of my score, that is still significant. My credit reports are thin and dominated by 2 big baddies. One I very confident that I will be able to get removed. It is a Federal Tax Lien that was released in 2008. The other baddie is a credit card account that I completely butchered with tons of really bad lates. I eventually settled the debt for less than the total and the account was closed but not until 2011. This second item has the potential to plague me for a long time. So with this sort of credit report profile, I thing an instalment loan would fatten up my reports and could have a significant impact on my score. The other benefit to me is as a savings vehicle. It would be as if I have an auto loan but I am actually paying myself back and at the end of the term I will have a nice chunk of changed to invest or do something else with. The cost is the cost of carry, the interest that I pay the bank on the loan but that is not a large amount of money in real dollars and is a price I am willing to pay to improve my score and to help me to save money in a diciplined fashion by paying an instalment each month. It is retraining me to save in a disciplined way.

Message 8 of 8