Secured Loan

[cam2103]

Hello All,

Found a Credit Union with several products to help with credit restoration. 

I've got a secured Visa through them (they don't report it as secured and they also do secured loans through a CD. What I'm wondering is a $5k loan better than a $1k loan as far as improving credit or is it mainly payment history?

Thanks in advance.

[ccnewcc]

Not sure.

But I wouldn't recommend a secured loan.  Seems a bit odd to pay for your own money.  Akin to paying some guy to "improve" your Credit Score, but when all is said and done, your got a point or two improvement and out of pocket way more money and time than it was worth.

[cam2103]

The rational behind the secured loan is the same as a secured credit card. My understanding is payment history is crucial to rebuilding credit. 

The way it works is you give the credit union lets say, $1,000 then they hand it back to you and you make payments to equal $1,000 plus a bit of interest. At the end of the term you get $1,000 back. The credit union makes some money on the interest and you are able to show positive payment history.

This "loan" would be in addition to a secured card through the credit union and a Capitol One unsecured card. With three positive trade lines and positive payment history I expect to see some significant movement regarding my "credit worthiness".

So, I'm still wondering if a higher "loan" amount would be more helpful.

[Shogun]

FICO scores don't really factor in amounts.  They just look for on time payments, or adhering to the payment agreement.

[sphinx313]

I believe the payment history would be better as far as an automatic pull would be concerned, but obviously a higher balance loan=more trust from a manual review in regards to other types of loans. If you currently do not have an installment account and you don't believe you could  acquire a decent one with your current scores, I would do it. Yes, paying money for your own money doesn't sound appealing...but that's where we are now. As long as the interest is acceptable, go for it!

[ccnewcc]

I'm not a fan of getting credit in the hopes that it will improve credit scores.  I am a fan, however, of getting credit that is needed (the ability of float purchases for 30 days, needing a 5k loan for home repairs) and that will, in addition to the need, help credit.

Secured Credit Cards are one thing.  Secured loans are something entirely different and something that I would never do nor recommend.

My adivce would be stay with your two secured CCs.  Maybe try for a 3rd cc -- an UNsecured CC, perhaps?

[cam2103]

---

@Shogun wrote:

FICO scores don't really factor in amounts.  They just look for on time payments, or adhering to the payment agreement.

---

Thanks!

[KatrinaE]

Yes the higher the loan the better - shows someone took that much of a "risk" on you.  The higher the credit available to you - your secured and unsecured credit lines - the better.  You may want to consider taking that money and upping your credit line instead it may give you better bang for your buck.   There are others here who know better on the Mix factor than I do.  But I'd try to get between $3,000-5,000 on that credit line before opening a TL.

[cam2103]

---

@Anonymous wrote:

I'm not a fan of getting credit in the hopes that it will improve credit scores.  I am a fan, however, of getting credit that is needed (the ability of float purchases for 30 days, needing a K loan for home repairs) and that will, in addition to the need, help credit.

Secured Credit Cards are one thing.  Secured loans are something entirely different and something that I would never do nor recommend.

My advice would be stay with your two secured CCs.  Maybe try for a 3rd cc -- an UNsecured CC, perhaps?

 Hey CC,

Could you elaborate on the above? Is'nt a secured credit card a secured loan?

---

[cam2103]

---

@KatrinaE wrote:

Yes the higher the loan the better - shows someone took that much of a "risk" on you.  The higher the credit available to you - your secured and unsecured credit lines - the better.  You may want to consider taking that money and upping your credit line instead it may give you better bang for your buck.   There are others here who know better on the Mix factor than I do.  But I'd try to get between $3,000-5,000 on that credit line before opening a TL.

---

You mean increasing the secured card credit limit would be more beneficial than the same money used in an unsecured loan?