12-05-2012 01:23 PM
This question is for all credit gurus out there.
The title says it all. Since "type of credit" is one of the weighing factors in FICO scoring model, should I take out a small personal loan (say $1000 for 1 year) to raise my FICO score? What will be it's impact on my FICO score with the process of time?
My CU offers a 1 year secured CD for $1000 at very low interest rate.
Thanks in advance!
12-05-2012 01:59 PM
The installment loan will increase your score by a mere couple of points and will only help you if you are past the first year of the inquiry, if you are past the first year of new credit, and if the remaining balance is a fraction of the original principal. A nice bonus is the mixture will keep helping you even after the account has been paid and closed.
12-05-2012 02:09 PM
No I have only 10 months of credit history. Should I wait until until I get past 2 more months?
Secondly, would you mind explaining what you mean by this?
"A nice bonus is the mixture will keep helping you even after the account has been paid and closed."
12-05-2012 09:03 PM
I asked this question 6+ months ago. At the time I had only 2 CCs, both had a combined UTIL of over 80% and I always got denied for everything, CLI, new cards, etc. I did took out a loan ($1K) and while I didn't knew my FICO score at the time, my CK FAKO dropped a considerable amount of points (60) (and didn't really recover until I added more accounts later on). I still couldn't get approved for CLI or new cards after taking the loan, it wasn't until I paid off my cards to below 10% (0% really) that I could get my first CLI and new accounts.
I am not sure if my installment loan has helped any, it shows an outdated balance from 4 months ago on TU and EX, and doesn't appear on EQ (have had this same thing happen to a cousin with a loan as well). It will probably help my AAOA and account mix down the road, but in the short term CCs (keeping UTIL low, paying on time, etc) seemed to be the most important factor.
IMO, you should only take credit out that you need and/or will use and eventually you will have a strong and varied portfolio. If I could redo it again I wouldn't have taken the $1K loan as it is costing me interest. Patience is key.