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Senior Contributor
bichonmom
Posts: 3,318
Registered: ‎05-05-2011
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Would an installment loan help my score

I've read that it's good to have different types of credit. I presently only have 3 CCs, which I've gotten in the last couple of months. My credit analysis shows 100% revolving credit, and I'm wondering how that might be negatively impacting my score.

 

I can easily get a secured installment loan at my bank (and have it report to the CRAs). When I was applying for a CC through Elan Financial (who provides CCs for my bank), one of the reasons why I was declined (and ended up getting Cap One!) is because I had no open accts. I thought I should wait for my secured loans to be PIF before applying for a CC because I thought my score would be higher once they were paid off. The underwriter at Elan told me that I would have been better off applying for the card while the loan was still open. (Geez, this credit stuff is SO confusing and seems illogical :smileyhappy:)

 

Anyway, I'd really appreciate knowing if it would help my score to open another secured loan at my bank... Or might that make things worse because it would lower my AAoA (which is really low right now anyway).

 

Thanks!

 

 

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EQ FICO 750 | TU FICO 761 (Walmart) | EX FAKO 767 | Goal: 800+

Edits, funky spacing and spelling due to my iPad not getting along with the forum editor!

Mega Contributor
RobertEG
Posts: 17,706
Registered: ‎03-19-2007
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Re: Would an installment loan help my score

FICO has various categories of credit scoring.  In some categories, a new installment loan will help, and in others it will hinder.

In the FICO category called Credit Mix, which is only 15% of total scoring, you will gain improvement by having both revolving and installment credit.

In other categories, you might take a hit.

To obtain a new loan, you will most likely have a pull of your CR.  That addes an inquiry, which results in a small ding in your score.  However, credit inquiries only affect FFICO scoring for one year.

If the loan is granted, it will result in a new trade line being addred to your credit report.  It will, of course, have an initial age of accounts of zero.  Depending upon your current age of accounts, the number of other trade lines both open and closed, and their ages, it could have different levels of effect on your average age of accounts.

Installment loans are scored under % utilization, but at a much, much lower weighting that % util of revolving credit.  The impact is minimal.

 

So it depends upon your individual credit file.

Unrelated to credit scoring, you will of course pay interest on the balance of the installment loan.  If it is an unnecessary loan, that is just money out of pocket.

Senior Contributor
bichonmom
Posts: 3,318
Registered: ‎05-05-2011
0

Re: Would an installment loan help my score

The interest would only be a point or two above the interest rate on the savings, so the cost is minimal. Would it still affect my util if it's a secured loan (since the money is actually still sitting in the savings acct.)?

 

 

~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*
EQ FICO 750 | TU FICO 761 (Walmart) | EX FAKO 767 | Goal: 800+

Edits, funky spacing and spelling due to my iPad not getting along with the forum editor!

Frequent Contributor
Student_Loans_Kill
Posts: 297
Registered: ‎02-12-2012
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Re: Would an installment loan help my score

i'd like to know this question as well


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FrugalRican
Posts: 2,876
Registered: ‎02-02-2012
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Re: Would an installment loan help my score

Make sure they actually report. I went down this path once with a CD-secured loan, and after a year of paying that bad boy down... I found out way too late that they never actually reported.

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Senior Contributor
bichonmom
Posts: 3,318
Registered: ‎05-05-2011
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Re: Would an installment loan help my score


FrugalRican wrote:

Make sure they actually report. I went down this path once with a CD-secured loan, and after a year of paying that bad boy down... I found out way too late that they never actually reported.


That's true. In most cases banks and CUs don't report secured installment loans, or passbook loans, as they're sometimes called. But you can ask the bank/cu to report it monthly to all CRBs. Just confirm before you open it that they'll do that for you.

it helped me to rebuild my credit, but it's a good idea to also have a secured cc and a total of 2-3 TLs reporting. You can re-use the same money for 2 loans and 1 cc.
~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*
EQ FICO 750 | TU FICO 761 (Walmart) | EX FAKO 767 | Goal: 800+

Edits, funky spacing and spelling due to my iPad not getting along with the forum editor!

Frequent Contributor
Student_Loans_Kill
Posts: 297
Registered: ‎02-12-2012
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Re: Would an installment loan help my score

USAA Secured Deposit loan reports as a regular installment loan. In addition they don't pull a credit report


Starting Score: 656
Current Score: 678 TU 08, 665 EQ MyFico, 698 EX PSECU
Goal Score: 7OO needed for Mortgage application


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Revelate
Posts: 9,477
Registered: ‎12-30-2011
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Re: Would an installment loan help my score


Student_Loans_Kill wrote:

USAA Secured Deposit loan reports as a regular installment loan. In addition they don't pull a credit report


Maybe if you have another loan or credit product on file with them recently, but that runs contrary to what a number of people have posted in the last few months.  I haven't checked my EQ report since I opened the USAA secured CD loan, so I can't speak first-hand for it until I do in another 30ish days.

 

It does report as a typical installment loan though from everything I have checked so far.

Starting Score: EQ 561, TU 567, EX 599* (12/30/11, EX lender pull 12/29/11)
Current Score: EQ 04 673, EQ 8 707, TU 720, EX 702* (09/02/14, EX older)
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