Personal loans vs Revolving CC accounts

[Lucid08]

Hi all,

I'm in the process of reestablishing credit after 10+ years of no open tradelines of credit activity(due to health issues). In October I pulled my free annual credit reports from all 3 bureaus, and the only thing showing on all 3 reports are medical collection accounts(of which I am in the process of getting paid/deleted). I also purchased the Suze Platinum kit for future score/credit report checking as I rebuild my credit into 2008.

We have a credit union where I work and they offer a credit builder program where I can get secured personal loans for whatever amount I want to secure with my savings account. Using this program there are no credit report pulls, but they do report to all 3 CB's monthly once payments are begun on the loan. I have also gotten 2 small personal loans from 2 local finance companies in which I pay back over the course of 6 months at very small payments. I have the option of renewing these small personal loans every 6 months so as to keep the accounts active. The Credit Union loan is very nice, because since I dont actually need the money I can just deposit the loan amount right back into my savings account so I can double the loan amount(to raise my maximum credit line) every time I decide to renew the loan.

My questions are:

I have considered applying for a secured credit card or two, but the ones that I can find online have outrageous yearly/monthly fees and very high interest rates.

1) Are the small personal loans like I have above just as good at rebuilding credit history as a credit card account?

2) How is the FICO score generated from small personal loans like I have versus credit card revolving accounts?

3) Do I really need to get a revolving CC account to help raise my FICO score over the coming months?

Any feedback is greatly appreciated.

[Tuscani]

1) Are the small personal loans like I have above just as good at rebuilding credit history as a credit card account?

Yes, but remember, revolving credit is much more important when calculating util. And util is a big part of your score. Installment loans also add to your mix of credit.

2) How is the FICO score generated from small personal loans like I have versus credit card revolving accounts?

Depends on what "flavor" of FICO the lender is using. Most use classic or BEACON in which case the same score would apply to CC or Installment (personal loans). Some banks may use a specific flavor depending on the product you apply for. An example would we Bankcard for CCs or Auto Enhanced for Auto loans. These scores are typically similiar to classic but do pay special attention specific TLs.  

3) Do I really need to get a revolving CC account to help raise my FICO score over the coming months?

Yes, revolving adds to your mix of credit which is important.

[Anonymous]

Hi Chris, welcome to the forum. Here you will find a wealth of information to help you regenerate your credit health.

I think it's an EXCELLENT idea to join your company's credit union, and take out that loan. Pay religiously on it, on time every time. Then apply for a credit card. Yes 10% of your FICO scores are  based on your various credit instruments(cc's, loans, mortgages, car loans, etc). And a CU is a great place to get one. They are usually more lenient in granting CL's.

If you don't mind sharing, what are your FICO scores, and the date? if we new that, we could suggest various avenues open to you.

Finally come here, come here often, and read, read, read. Start with reading all items on the menu bar, starting with "Credit Education". Sooooooo much can be answered just by reading them. It is often overlooked.

Ask questions. That's the way we learn. Many knowledgable people here, and we're a friendly bunch(albeit somewhat strange! LOL)

[Lucid08]

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Sylviatob wrote:

Hi Chris, welcome to the forum. Here you will find a wealth of information to help you regenerate your credit health.

I think it's an EXCELLENT idea to join your company's credit union, and take out that loan. Pay religiously on it, on time every time. Then apply for a credit card. Yes 10% of your FICO scores are  based on your various credit instruments(cc's, loans, mortgages, car loans, etc). And a CU is a great place to get one. They are usually more lenient in granting CL's.

If you don't mind sharing, what are your FICO scores, and the date? if we new that, we could suggest various avenues open to you.

Finally come here, come here often, and read, read, read. Start with reading all items on the menu bar, starting with "Credit Education". Sooooooo much can be answered just by reading them. It is often overlooked.

Ask questions. That's the way we learn. Many knowledgable people here, and we're a friendly bunch(albeit somewhat strange! LOL)

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Hi Sylviatob,

I dont think I have any scores at all. I tried pulling my scores with the Suze kit I purchased, but it said that I did not have any TL's that were aged for 6 months or more, which is true. I got one of the small personal loans at the end of October, and the other the first week of November. One company told me they report every 30 days(to Equifax) on my payment due date, and the other says it reports every 60(to Experian) days. It looks as tho I'll need to wait until I've paid on both accounts for a few months until I'll have a score with those two CB's.

I'm taking out the Credit Union loan this coming week, so it'll probably be a few months with that account also before it establishes a score for me. I'm in no big hurry, as I know it takes time to do this correctly. But I am using the information in this site as much as possible.

My Goal in all of this:

I'll be honest about this I want to purchase myself a new Harley Davidson within the next year or so as an alternative to my gas hog vehicle that I drive daily. My last trade line of credit that I had open was when I paid off(paid off in '97) a car I had purchased while in the military. Since then I've had some medical issues which caused me to be out of work for a few years (2000-2002). I've been at my current job for almost 4 years now and am finally in a position where I feel comfortable in taking on some debt. I found this site while doing a search on the word "FICO" in an attempt to find out as much as possible about rebuilding credit once I pulled my free reports in october.

I do have some medical collection accounts on all 3 reports, but I'm in the process of disputing/paying for delete/paying OC-- them all. I'm not sure how bad these medical collection accounts are hurting my score, or if I should wait until I have them -all- removed/shown as paid/ect.. before I apply for a CC or vehicle loan. I'm finding info on this and other sites, but some of this stuff is very confusing.

I appreciate the warm welcome, and I look forward to spending some time here on the forums as I make progress on rebuilding my credit

[Anonymous]

I would advice to go with your credit union as the rates would be better and experian and trans union penalize you for having a consumer. I have on my report and EX and TU comment on it.

12/01/07 EQ 735 EX 713 TU 737

[jackg]

Chris,

All the replies you've received contain really good, solid advice and I want to add that I belong to 2 credit unions and they are the BEST in my opinion.

One thing for you to consider when it comes to FICO scores and installment loans is that they are considered a monthly obligation, in the amount of the loan, and can negatively effect your score if you have too many. ie: 2 car loans and 1 line of credit.

[Lucid08]

Just an update and another question.

I got the CU loan setup and payments begin in Jan for 6 months. I also got good news today from TU regarding my dispute letter. 7 of the 8 medical disputes were deleted. I'm so happy!

While applying for the CU loan, I asked the loan officer a few questions about how to best prepare myself so I might be better qualified when it came time to apply for my RV loan later next year. I asked her about getting revolving CC accounts, but she kinda gave me the impression that I will be better suited with the savings secured loans than by going out and getting CC's. She hinted that they would be looking more at how long I was employed, how I handled my checking account, and how I paid this new loan back over the course of the coming months. She said the actual FICO score would not play that -big- of a part with -them- as it would with major banks and lending institutions.

I want to build a good credit report/history, but I swear the more I read on this site and others, the more confused I become when I actually talk to lenders face to face locally. Are CU's the gold mine that they appear to be? I kinda got the impression from this lady that they really are.

[haulingthescoreup]

They really are. I'm with USAA (I'm a grown-up Army brat), which is kind of like a CU. They have offered me their MasterCard, AmEx, home equity line of credit, and car financing, all pre-approved, without me asking for any of them, and with the most abysmal scores you can imagine, simply because I've been with them for a long, long time. I also have my checking and Roth IRA with them, and we're in the process of switching over our car and homeowners insurance. We also belong to our local college-based CU, where we have checking, savings, a car loan, and a ridiculous number of personal loans.

You might not get the glam CK's and APR's, although some CU's are fantastic that way, but you do get great service, and they don't sucker you into things you can't handle. Even when you add non-CU products, they make a great backbone for your finances.