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What will a new installment loan do?

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sisyphuswins
Contributor

What will a new installment loan do?

Hi All,

 

This is my first post and I have a quick question.  Basically, after a long slog starting in March, I have raised my credit from the mid 500s to the mid 600s and today, I received a pre-approval from the bank for a mortgage!!!!!!   Smiley LOL   

 

However, my mother has also recently had a stroke.  I'm an only child and she does not have much in the way of savings.   There's some thiings that I need to do for her, and it will take some money, which I won't have at the moment because everything is tied up in buying the house.  I should mention that I work on commission and so I get money in bits and bobs--when it comes, it's usually great, but it's not terribly steady.  Paying off all of my debt and living in a very expensive temporary apartment waiting for the credit bureaus to finally get all my info correct so today could happen has eaten my surplus, but I am expecting a sizable commission check in the next month which will pay for the house costs, plus will cover what my mother needs.  But she needs things now, and so I was thinking about taking out an installment loan for several thousand to cover her needs in the short term.  I'll be able to pay it back once the big commission check comes, but I was worried in the meantime if doing this would jeopardize my mortgage plans. 

 

What would the immediate damage be to my credit score?  And would paying it quickly etc., offset that?   I'm in a bind and I know I'm emotional about this, so I want to make sure I make a level-headed decision.  But my mother doesn't have anyone else but me!

 

Thanks in advance everyone

Starting Score (6/30/14): Credit Karma 619; Quizzle 656
Current Score (4/3/2015): TU 741; EQ 718; EX 671; FICO 8 Bankcard 730
Goal Score: 800 (aim high!!)

Message 1 of 12
11 REPLIES 11
Anonymous
Not applicable

Re: What will a new installment loan do?

I've run this scenario on my credit monitoring membership, and basically it suggested to me that if you have a auto loan, and get a second loan, that second loan will not effect the score.

 

Again, this is from my credit monitoring.  If you're a member to any of them, I believe most have a similar type of model where you can actually play 'what if" and it will give you idea's of how opening new types of credit will impact your score.

Message 2 of 12
timotiger
New Contributor

Re: What will a new installment loan do?

I'm a mortgage officer. I would work closely with your mortgage officer as he can guide you the best. However, I would tell you that installment loans are better than revolving debt. Next, stay away from installment companies like Wells Fargo, HFC, Citibank, World Finance, etc. Also, stay away from pay day loan places. From what I have learned, these types of signature loans are scored more punitively. Consider that you are opening a new trade line for the short term. That will effect your agings and the penalty for opening a new trade line. Also, it will impact your debt to income ratio for your mortgage loan. You have to be under 50% in most cases. Your irregular income would concern me as well as an loan officer.  Therefore, if the money is a short time away, I would try to borrow from a friend or family. If that won't work, use what credit you have sparingly. Just my two cents.

Message 3 of 12
Anonymous
Not applicable

Re: What will a new installment loan do?

Thanks Timotiger that was really useful information.

I was suprised by the fact that payday loans will hurt your score. Im in a bind and although I have raised my score on the free report to 686 and TransUnion reported on a failed loan to me at 655 I couldnt pull a small loan for 6900. Its for a mistake I made that may make me lose my house.

Message 4 of 12
sisyphuswins
Contributor

Re: What will a new installment loan do?

I just did a simulator--thanks for the tip--and it said it would cause an initial slight dip, followed by an improvement if I made payments on time.   

Starting Score (6/30/14): Credit Karma 619; Quizzle 656
Current Score (4/3/2015): TU 741; EQ 718; EX 671; FICO 8 Bankcard 730
Goal Score: 800 (aim high!!)

Message 5 of 12
sisyphuswins
Contributor

Re: What will a new installment loan do?


@timotiger wrote:

I'm a mortgage officer. I would work closely with your mortgage officer as he can guide you the best. However, I would tell you that installment loans are better than revolving debt. Next, stay away from installment companies like Wells Fargo, HFC, Citibank, World Finance, etc. Also, stay away from pay day loan places. From what I have learned, these types of signature loans are scored more punitively. Consider that you are opening a new trade line for the short term. That will effect your agings and the penalty for opening a new trade line. Also, it will impact your debt to income ratio for your mortgage loan. You have to be under 50% in most cases. Your irregular income would concern me as well as an loan officer.  Therefore, if the money is a short time away, I would try to borrow from a friend or family. If that won't work, use what credit you have sparingly. Just my two cents.


Thanks for the very informative reply.   I'm still on the horns of a dilemma here---there's nobody else to borrow from.  I've got 1 open credit card, and the cash advance limit is only $375 on that, so that's not really helpful.   And my current debt to credit ratio is 16% debt/84% credit, and debt to income currently 96% income/4% debt.  The mortgage will lower my outgoing expenses from $2250/month rent to about $500/mortgage/insurance/taxes.   So a small temp loan shouldn't change those numbers by much.  But I guess my score will feel a bit of pain.  

 

Starting Score (6/30/14): Credit Karma 619; Quizzle 656
Current Score (4/3/2015): TU 741; EQ 718; EX 671; FICO 8 Bankcard 730
Goal Score: 800 (aim high!!)

Message 6 of 12
timotiger
New Contributor

Re: What will a new installment loan do?

Good information **bleep**!

Message 7 of 12
igids1
Regular Contributor

Re: What will a new installment loan do?

If you are looking to get a mortgage within the next couple of months, I think this would be **bleep**

Message 8 of 12
timotiger
New Contributor

Re: What will a new installment loan do?

es if you go **bleep** ineligible, he can advise you on what to take care of to get qualified.  Sorry about these beeps. There must be a virus or something. I sent an email to the moderator.

Message 9 of 12
sisyphuswins
Contributor

Re: What will a new installment loan do?


@igids1 wrote:

If you are looking to get a mortgage within the next couple of months, I think this would be **bleep**


Stupid bleeps---I can't figure out what you might have said here.

 

Starting Score (6/30/14): Credit Karma 619; Quizzle 656
Current Score (4/3/2015): TU 741; EQ 718; EX 671; FICO 8 Bankcard 730
Goal Score: 800 (aim high!!)

Message 10 of 12
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