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Of course, if it is in good standing, but how many point could it increase the credit score by? Say for example, with a year of perfect payments?
Read this thread to get an idea of what might be possible: http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secu...
The payments aren't really what improves one's FICO, but having the installment loan at a pretty utilization is what really is nothing but goodness under FICO 8 and presumably FICO 9.
Payment history is payment history, and revolving, installment, other, doesn't matter: the absense of negative information is the positive in this case as even thousands of OK's are dwarfed by even a single 30 day late at least when it first occurs.
On my dirty file at 700-720ish, playing the share secured loan trick was worth 20-24 points; for a clean file, it's worth even more anecdotally.
@Revelate wrote:The payments aren't really what improves one's FICO, but having the installment loan at a pretty utilization is what really is nothing but goodness under FICO 8 and presumably FICO 9.
Payment history is payment history, and revolving, installment, other, doesn't matter: the absense of negative information is the positive in this case as even thousands of OK's are dwarfed by even a single 30 day late at least when it first occurs.
On my dirty file at 700-720ish, playing the share secured loan trick was worth 20-24 points; for a clean file, it's worth even more anecdotally.
+1
Agree fully with this. It is more about the mix of credit in that category of scoring, as well as each individual profile, which will.determine how points are given. Everyone will be different.
Total CL: $321.7k | UTL: 2% | AAoA: 7.0yrs | Baddies: 0 | Other: Lease, Loan, *No Mortgage, All Inq's from Jun '20 Car Shopping |
I will read that huge article the other person referred me to but what is utilization since an installment loan is at 100% utilization?
@Anonymous wrote:I will read that huge article the other person referred me to but what is utilization since an installment loan is at 100% utilization?
Current Balance / Original balance.
<9% = winning. So basically you simply take the loan, pay most of it back, and then sit on it for as long as possible. Using this method makes the interest trivial as well so it's not the financial penalty of "taking a loan we don't need" has historically been.
@Revelate wrote:
@Anonymous wrote:I will read that huge article the other person referred me to but what is utilization since an installment loan is at 100% utilization?
Current Balance / Original balance.
<9% = winning. So basically you simply take the loan, pay most of it back, and then sit on it for as long as possible. Using this method makes the interest trivial as well so it's not the financial penalty of "taking a loan we don't need" has historically been.
Would it lower one's credit score if it happened to be at 133%, even though the loan is in good standing?
@Anonymous wrote:
@Revelate wrote:
@Anonymous wrote:I will read that huge article the other person referred me to but what is utilization since an installment loan is at 100% utilization?
Current Balance / Original balance.
<9% = winning. So basically you simply take the loan, pay most of it back, and then sit on it for as long as possible. Using this method makes the interest trivial as well so it's not the financial penalty of "taking a loan we don't need" has historically been.
Would it lower one's credit score if it happened to be at 133%, even though the loan is in good standing?
Not sure how that's possible on a simple interest loan but I doubt it TBH. Deferred student loan? That's about the only way I could see it if someone wasn't making the interest payments.
I don't think there's any penalty for being over 100% in this case.
@Anonymous wrote:I will read that huge article the other person referred me to but what is utilization since an installment loan is at 100% utilization?
When you pay the loan down, the utlization is the balance divided by the original loan amount.
If you take out a $500 loan and pay it down to $45, you have 9% utilization.
@Revelate wrote:Not sure how that's possible on a simple interest loan but I doubt it TBH. Deferred student loan? That's about the only way I could see it if someone wasn't making the interest payments.
I don't think there's any penalty for being over 100% in this case.
That's exactualy what I was thinking about if I took out a loan for school.