FICO Score

[corymcd88]

MyFICO, Walmart FICO, Discover FICO are all telling me that one of the reasons that my score is low is that I don't have a reason installment loan. My last one was paid in Jan 2015. I can get one with a very low interest rate. My FICO's are EX: 679, EQ: 769, TU: 773.

[ksantangelo23]

I wouldn't take out an installment loan simply to boost your score. I have a negative factor that includes "Lack of mortgage history" or something to that effect. Im definitely in  no rush to take out a mortgage 

You'll always have some negative factor, and the higher your score becomes, the more nit-picky it will get.

[blondy250]

Not worth it for a potential small score bump.

[Anonymous]

I will play devil's advocate (for fun but also to examine a different perspective).

There are several past threads that highlight/talk about getting a low amount (~$500 or as low amount as you can possible obtain), 4-year loan from a CU just for the sake of diversifying one's credit mix.  For granted, you would pay some interest for this loan but you could technically be rewarded with a higher credit score.  I personally do not condone going this route just for the sake of bumping up your score BUT it would be something that I would research if I was buying a house.  A higher score could mean a lower home loan rate --- even a reduction in .1% could mean thousands of dollars in savings.  I would gladly trade a few dollars due to loan interest if a home loan at a lower rate was the end result.

This scenario has a ton of what-ifs and has its own risks to consider but it is something to think about if it consistently matches reality.

[Anonymous]

From my (limited) observation:

1) They need to provide some negative reasons and as your score gets higher those reasons become less significant.  If your score is 500 then it may make a lot of difference.  If your score is 840 then it is very nit picky and may only give you a point or two.

2) The shorter your history the larger the effect.  If you have little history adding a loan can make a difference as it provides more information for a decent score.  If you have 20+ years of history then they already have lots of information and the loan is not so useful.

One of my key rules with credit is "Don't apply for credit you don't need".  I would not bother with the loan just to try to boost your score.

[Anonymous]

I constantly see posts asking for advice about building credit and the first thing people recommend is to get a small loan.

My understanding is for an optimal credit portfolio, 3 bankcards, 1 store card and 1 installment loan is suggested.  Usually the loan is student, auto or mortgage loans. If those aren't a tradeline, a secured loan from a credit union is recommended.   I am sure that is why you are seeing that suggestion.  I got a washer and dyer on credit.  It is 12 mo. Same as cash but reporting as an installment loan.  Now the recommendation is to pay it down as they see my balance being too high lol

As mentioned above,  if you aren't trying to boost scores for a mortgage loan, I wouldn't waste time or money on it.