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New Member
LordAthens1
Posts: 12
Registered: ‎04-29-2013
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Which would help me more, 36mo installment loan or using a CC as a small loan?

I have been working on rebuilding my credit.  I have a thin'ish file.  7 TL on TU (3 baddies (2 should be removed very shortly, according to Verizon FIOS, they sent electronic deletions as of today, 1 $50 Cingular collection that drops off 06/2013, 1 closed joint auto loan with perfect payment, 1 newer account in good standing and I'm an AU on 2 other account). 

 

EQ is identical, with the exception of  an additional collection from Sprint that I hope to have rectified this week. 

 

EX shows the same, except only the 2 Verizon baddies, no other collections or negatives.

 

My fiances credit is in far worse shape.  Defaulted school loans that we can't seem to do anything with quickly (we are already in AES's "rehabilitation" program), 7 medical collections and 2 other small CC collections.  Total is about $3000 if we did full value PFD's on all of her negatives, sans the school loans.

 

As we don't have $3000 kicking around, I've thought about consolidating all of her debt, paying them all off to get her credit on the road to recovery.  A friend of mine who got me on the road to recovery thinks it's a better idea to wait a few weeks to see what my EX score is (I'm in with PSECU) and the Verizon negatives will have gone away by then.  At that point, since they only pull EX, apply for their Visa/loan combo and use the Visa to pay all of her things off, then simply treat that like a loan payment.  They seem to hand out 10-20k Visa cards like candy?  He only had his PSECU account for 3 months, right after he started rebuilding his credit and they gave him a $15k combo, which actually reports on his as a 15k revolving and a 15k line of credit, even though it's only $15k shared between the two of them, so it artifically lowers his utilization by showing $15k of credit that he doesn't really have.  My credit is in better shape right now than his was at the time of his approval, so I don't think I would have issues getting approved.  Visa card is 9.99%, line of credit is 12.99%

 

I'm not sold on that. 

 

The other CU I'm with offers unsecured (and secured) loans up to $5k @ 8.25% for 36mo.  From a financial standpoint, over 3 years the 8.25% installment loan will cost me just shy of $400 in interest, which I'm glad to pay to get her credit fast tracked.  The Visa @ 9.99% will cost me $485 in interest.  Realistically, I'll pay either of them off early next year with part of our tax refund, so interest won't be that bad

Anyhow, what I'm getting at; we're looking at buying our first home in the August / September time frame.  From a lenders and score perspective, what looks better; A) an installment loan with the agreed payments, or likely more than the agreed, made on time* or B) a Visa card, also being paid on time, $~100/mo, on a $3000 high balance?  I don't understand yet how loans rank against revolving credit, again AAoA, etc etc.

 

*I would still be applying for the PSECU Visa regardless, so that would lower my utilization further than having the installment loan or the Visa by itself.

New Member
LordAthens1
Posts: 12
Registered: ‎04-29-2013
0

Re: Which would help me more, 36mo installment loan or using a CC as a small loan?

Not sure if it matters to the info above, AAoA is 5 years.  0% utilization.  I PIF on my older Kay's Jewlers card.  I just got approved on a Cap 1 Platinum card, which will also likley be PIF every month, but that hasn't reported yet.  I only got that card in the mail on Saturday.

Valued Contributor
thom02099
Posts: 1,326
Registered: ‎08-30-2011
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Re: Which would help me more, 36mo installment loan or using a CC as a small loan?


LordAthens wrote:

I have been working on rebuilding my credit.  I have a thin'ish file.  7 TL on TU (3 baddies (2 should be removed very shortly, according to Verizon FIOS, they sent electronic deletions as of today, 1 $50 Cingular collection that drops off 06/2013, 1 closed joint auto loan with perfect payment, 1 newer account in good standing and I'm an AU on 2 other account). 

 

EQ is identical, with the exception of  an additional collection from Sprint that I hope to have rectified this week. 

 

EX shows the same, except only the 2 Verizon baddies, no other collections or negatives.

 

My fiances credit is in far worse shape.  Defaulted school loans that we can't seem to do anything with quickly (we are already in AES's "rehabilitation" program), 7 medical collections and 2 other small CC collections.  Total is about $3000 if we did full value PFD's on all of her negatives, sans the school loans.

 

As we don't have $3000 kicking around, I've thought about consolidating all of her debt, paying them all off to get her credit on the road to recovery.  A friend of mine who got me on the road to recovery thinks it's a better idea to wait a few weeks to see what my EX score is (I'm in with PSECU) and the Verizon negatives will have gone away by then.  At that point, since they only pull EX, apply for their Visa/loan combo and use the Visa to pay all of her things off, then simply treat that like a loan payment.  They seem to hand out 10-20k Visa cards like candy?  He only had his PSECU account for 3 months, right after he started rebuilding his credit and they gave him a $15k combo, which actually reports on his as a 15k revolving and a 15k line of credit, even though it's only $15k shared between the two of them, so it artifically lowers his utilization by showing $15k of credit that he doesn't really have.  My credit is in better shape right now than his was at the time of his approval, so I don't think I would have issues getting approved.  Visa card is 9.99%, line of credit is 12.99%

 

I'm not sold on that. 

 

The other CU I'm with offers unsecured (and secured) loans up to $5k @ 8.25% for 36mo.  From a financial standpoint, over 3 years the 8.25% installment loan will cost me just shy of $400 in interest, which I'm glad to pay to get her credit fast tracked.  The Visa @ 9.99% will cost me $485 in interest.  Realistically, I'll pay either of them off early next year with part of our tax refund, so interest won't be that bad

Anyhow, what I'm getting at; we're looking at buying our first home in the August / September time frame.  From a lenders and score perspective, what looks better; A) an installment loan with the agreed payments, or likely more than the agreed, made on time* or B) a Visa card, also being paid on time, $~100/mo, on a $3000 high balance?  I don't understand yet how loans rank against revolving credit, again AAoA, etc etc.

 

*I would still be applying for the PSECU Visa regardless, so that would lower my utilization further than having the installment loan or the Visa by itself.



What are your scores?  You'll be able to get more useful responses if we know what your scores are that you're dealing with. 

 

Based solely on what you've posted here, if it were me, I'd go with the "other" CU that offers the un/secured loans at the 8.25%.  Is that the interest rate that they offered you, or is that their advertised rate?  That could also make a difference, if based on your scores, the interest rate is higher.

 

Also, with SOME mortgage lenders, if you're carrying credit card debt, ANY cc debt, they will want that paid off in full before they will underwrite a mortgage.  Not all, but enough of them out there to make this a challenge.  They frequently look more favourably on installment loans, since there is a finite amount to pay and a specific payoff date, assuming the loan does not default. 

 

Personally, I'd wait til this time NEXT year to be looking to buy that house, unless you've got really killer scores right now.  Again solely based on the info you've provided, I think you'll be in a much better place a year from now, assuming that your above (sound) plan is a go. 

AMEX Gold NPSL / AMEX Zync NPSL / AMEX Blue Cash Preferred $14K / Bank of America Cash Rewards Signature Visa $15K / Merrill Lynch Plus Signature Visa $15K / Wells Fargo Propel 365 $15K / Chase Sapphire Preferred Signature Visa $10K / J P Morgan Select Signature Visa $10K / Chase Slate Visa $6K / CITI Diamond Preferred MasterCard $13.2K / Discover IT $10.5K / IberiaBank Select Visa $8K / 1st Command Bank Platinum Visa $7.5K // Home Depot $9.7K / Lowes $10K

EX = 768 EQ = 828 TU = 834 - June/2014
New Member
LordAthens1
Posts: 12
Registered: ‎04-29-2013
0

Re: Which would help me more, 36mo installment loan or using a CC as a small loan?

thom, thank you for your insight.

 

Not sure how I managed to forget to put my scores in..  From Score Watch as of a few days ago; TU 672, EQ 607.  Unsure of EX at the moment (I have to wait until 06/01 for PSECU to pull that score), but I suspect it might be the highest of them all as it is only reporting 2 of the 4 baddies that I have.  The 2 Verizon baddies should be deleted from all 3 CRA's any day.  The other 2 baddies (1 on TU, 1 on EQ) will be gone by July at the latest.  At that point I will have no negative listings and will have no debt, be it credit card or otherwise.  Once the PCL and open collection come off of the report from Verizon in the next few days, I suspect all 3 numbers will jump.

 

Regarding the CU rate, that is their advertised rate.  It might be higher for me, it might not.  They have three LO's on their board, so it's pretty easy for me to plead my case that we're trying to consolidate and clean up her financial mistakes.  Worst case, I can talk to them before hand to see where I would lie with them, before they do a hard pull on me (I'm also trying to keep my INQ's down, due to mortgage).  Absolute worst case, I'm pretty positive I'll get approved on the PSECU combo, so we can use that.

 

The biggest issue for us with the mortgage right now is she has a ton of negatives on her credit with unpaid collections, so she is immediately not eligible according to the first mortgage person we dealt with, further saying that she would bring down my score if we co-applied with her current credit.  She said I'm pre-approved based on her credit pulls, but the issue is I only work seasonally, then I'm a stay at home father with our two children.  My on-the-books income that they go off of would only allow a $500/mo mortgage, certainly not going to buy the type of home we are looking for.  My fiance is, for the time being, the primary income for our household.

 

Our rental lease is up at the end of September and we will NOT be renewing it.  The landlord is literally bi-polar and her husband clearly has some severe issues as well.  They are both absolutely nuts.  Phone calls with her go from happy, to her bursting out in tear over the phone, then back to happy.    I refuse to rent for another year and just continually throw away money.  Our rent is $750/mo right now and we have no issues going to $850-900/mo for a home.  We have been looking in the $100-130k range as a starter home.  In 7 years, my rent has been late a total of 4 times.  It has never been due to lack of funds, rather miscommunication, things like she thought I was taking the rent, when I thought she said she would, or we were out of town seeing family and simply forgot to take it before we left.  Of course, my rent has never been reported to any of the CRA's, so our most expensive and most important monthly bill means nothing as far as that is concerned.  We're very aware that we would be in a better situation in another year, but the reality is that it isn't an option.  Even if we were to put away another $200 a month for another year and get everything else paid off, I don't suspect my scores will go up much until I start getting more TL's and AAoA on my report.  And at $200/mo for a year, that only adds $2400 to our down payment.  A good chunk, but I'm not sure if it would make a huge difference.  I have every intention on attempting to refinance in a few years once we have a better credit foundation.  We also will be putting an additional $4k/ year payment every March/April on the home from a portion of our tax refund to help cut down the loan, which I think will help our refinancing options.  That will also help kill off the high PMI payments as well.

 

Ultimately what I'm trying to do is get her bills paid off to hopefully get her to the point that we can apply for the mortgage together and have her income counted towards it.  I don't have her CR's handy at the moment as I'm not at home, compounded by the fact that we were only able to pull her Experian from ACR.com.  For some reason Equifax and TU required us to call in and have it mailed.  TU showed up yesterday, still waiting on EQ. 

 

Anyhow, from what I remember off the top of my head, she has one C\O from Capital 1 that went to Pinnacle.  I don't know yet if Pinnacle is simply trying to collect or if they own the debt at this point.  I'm going to contact Capital 1 first to see if we can PIF to them, possibly GW the C\O status and then Pinnacle will have to delete their TL.  If not, then I'll PFD with Pinnacle and the Capital 1 TL will simply have to stand.  Thankfully that TL is many years old, back when she was in college.  She has 7 somewhat recent (last 3 years) medical collections totalling less than $2500.  As I don't believe the hospitals have sold those debts yet, I'm going to offer to PIF all of those, which will get rid of 7 bad TL's.  Out of 6 current student loans, she has defaulted on 2 of them.  One is now completely paid via a tax seizure from West Minster College that went to the US Dept. of Education (US Dept of Ed are the ones who did the government seizure).   The other is in rehabilitation with AES.  AES is unwilling to do anything good will wise, until 9 months worth of payments are made, so far we have 3 months of good payments on those.  Not sure if I can can do anything on the West Minster College / US Dept of Ed TL's.  I'm more concerned about getting the "easy" baddies off first. 

 

She has 4 Sallie Mae loans all in perfect standing, as well as a few store charge cards that also have good ratings.  All of her current charge cards have a $0 balance.  So, aside from the SL's, the Cap1 collection and the medical bills, there is no other debt. 

 

My parents are unable to cosign for us, same with her parents.  Her grandfather may be able to, same possibly with my grandparents, but her grandfather is already cosigned on all of her Sallie Mae loans, so we don't want to ask him.  My grandparents live a few hundred miles away and quite honestly, my grandmother is starting to lose it, mentally, a bit.  Grandpa is still all there, but I'm not sure what kind of complications would arrise with them being so far away, as far as documents and such go.  I really don't want to have to have them go out of their way to overnight documents and such.

 

Long story short, I'm willing to spend the money to fast track her credit to repair.  Once the medical's and (hopefully) the C/O status from Cap1 come off, her CR won't be actually that bad, the only bad will be the 2 of 6 SL's.  So that's where we sit at the moment.

 

You mentioned that lenders frequently look more favorably on installment loans, due to the specific payoff and end date.  That was exactly my logic when thinking about which way to go.  My friend felt differently, so I wanted to get additional opinions on the situation. 


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