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gen-specific
Posts: 299
Registered: ‎02-27-2013
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penalized for not having installment loan? what does this mean

[ Edited ]

EDIT: got an installment loan and my score is 764 now, up from 711 a month ago, up from 700 two months ago when I started this thread. Thanks to Revelate's suggestion of getting an otherwise pointless installment loan from Alliant CU

 

========

Hello, a rationale for a negative factor on my credit score/report is something about "not having an installment loan" 

 

what is this and how significant is this

 

 

 

also, when will "age of credit history" stop being a thing on my report

Citi Thank You Premier 60k, AMEX Blue 30k, Chase Sapphire Preferred 30k, BoA VISA Rewards 30k, Wells Fargo 30k, Barclays Arrival+ 20k, Citibank Custom Credit Line 12k, Macys/AMEX 2.5k/500

EFX 711, EXP 713, TU 713 - AVG 701 GOOD - May 2014
EFX ???, EXP ???, TU 764 - AVG 764 GOOD - Aug 2014
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myjourney
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Re: penalized for not having installment loan? what does this mean

I wouldn't worry about it the installment/motgage/auto loans only accounts for 10% of Fico scoring which leaves 90% other factors that affect you more 

"Intelligence plus character--that is the goal of true education"
Last 5 apps 6/6/13


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gen-specific
Posts: 299
Registered: ‎02-27-2013
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Re: penalized for not having installment loan? what does this mean

my score is 700 today, opening one gets me to 770? lol thats a 10% increase after all

 

can you tell me more about how that works

Citi Thank You Premier 60k, AMEX Blue 30k, Chase Sapphire Preferred 30k, BoA VISA Rewards 30k, Wells Fargo 30k, Barclays Arrival+ 20k, Citibank Custom Credit Line 12k, Macys/AMEX 2.5k/500

EFX 711, EXP 713, TU 713 - AVG 701 GOOD - May 2014
EFX ???, EXP ???, TU 764 - AVG 764 GOOD - Aug 2014
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azguy13
Posts: 5,381
Registered: ‎04-30-2013
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Re: penalized for not having installment loan? what does this mean


gen-specific wrote:

my score is 700 today, opening one gets me to 770? lol thats a 10% increase after all

 

can you tell me more about how that works


FICO scoring starts at 350 therefore 70 is not 10%

 

All it means is that you have not demonstrated that you can handle an installment loan (no positive history). It's no big deal. Don't go out of your way and pay X amount just for a few points. 




NFCU Flagship $25,000 I AMEX SPG $23,000 I Chase Sapphire Preferred $17,500 I Discover IT $12,000 I
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Revelate
Posts: 9,161
Registered: ‎12-30-2011

Re: penalized for not having installment loan? what does this mean

[ Edited ]

myjourney wrote:

I wouldn't worry about it the installment/motgage/auto loans only accounts for 10% of Fico scoring which leaves 90% other factors that affect you more 


Yeah well, I don't know if that holds water anymore under FICO 8: see the recent complaints of people who didn't have revolving tradelines.

 

It's pretty much unarguable that a strong file includes both revolving and installment tradelines, and I recommend to virtually anyone who finds these forums these days to pick up a silly secured installment loan.  Anyone is leaving points on the floor without them, maybe not as much as the no credit card people that got absolutely hammered on the FICO 8 transition, but it's not a positive under any stretch of the imagination.  

 

Put simply, it's easier to reach 760+ with them than without them, and for FICO purposes, temporarily tying up $1000 (or the same $500 twice if needbe in this instance) in a pair of secured installment loans is all that's really required.  Since you get the money right back anyway with the 100% LTV secured installment loan, we're just talking minimal interest payments at 2% or whatever interest rate which seems to be the current benchmark.  Something like a yuppie foodstamp in interest over the course of 4 years when I did the math, aka about the same as we'd pay to pull our reports from myFICO... and therefore worth doing for anyone that doesn't have auto or mortgage or possibly even student loans on their report.

 

ETA: "age of credit history" won't stop until you hit 850 on a FICO 8 pull, it might never go away on a FICO 04 one.

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)
Goal Score: 700 on EQ '04 (01/01/15)


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myjourney
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Re: penalized for not having installment loan? what does this mean


gen-specific wrote:

my score is 700 today, opening one gets me to 770? lol thats a 10% increase after all

 

can you tell me more about how that works


The weight of that category is 10% but it won't necessarily add 10% (points) to your score if you have a loan thus giving you a 770 score 

You wish Lol

"Intelligence plus character--that is the goal of true education"
Last 5 apps 6/6/13


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azguy13
Posts: 5,381
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Re: penalized for not having installment loan? what does this mean


myjourney wrote:

gen-specific wrote:

my score is 700 today, opening one gets me to 770? lol thats a 10% increase after all

 

can you tell me more about how that works


The weight of that category is 10% but it won't necessarily add 10% (points) to your score if you have a loan thus giving you a 770 score 

You wish Lol


I would add a $1,500 loan for a 70 point boost in a heartbeat. Sadly, even if I had no prior installment loans... it MAY give me 10 points after about 2 years :smileyvery-happy:




NFCU Flagship $25,000 I AMEX SPG $23,000 I Chase Sapphire Preferred $17,500 I Discover IT $12,000 I
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myjourney
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Re: penalized for not having installment loan? what does this mean


Revelate wrote:

myjourney wrote:

I wouldn't worry about it the installment/motgage/auto loans only accounts for 10% of Fico scoring which leaves 90% other factors that affect you more 


Yeah well, I don't know if that holds water anymore under FICO 8: see the recent complaints of people who didn't have revolving tradelines.

 

It's pretty much unarguable that a strong file includes both revolving and installment tradelines, and I recommend to virtually anyone who finds these forums these days to pick up a silly secured installment loan.  Anyone is leaving points on the floor without them, maybe not as much as the no credit card people that got absolutely hammered on the FICO 8 transition, but it's not a positive under any stretch of the imagination.  

 

Put simply, it's easier to reach 760+ with them than without them, and for FICO purposes, temporarily tying up $1000 (or the same $500 twice if needbe in this instance) in a pair of secured installment loans is all that's really required.  Since you get the money right back anyway with the 100% LTV secured installment loan, we're just talking minimal interest payments at 2% or whatever interest rate which seems to be the current benchmark.  Something like a yuppie foodstamp in interest over the course of 4 years when I did the math, aka about the same as we'd pay to pull our reports from myFICO... and therefore worth doing for anyone that doesn't have auto or mortgage or possibly even student loans on their report.

 

ETA: "age of credit history" won't stop until you hit 850 on a FICO 8 pull, it might never go away on a FICO 04 one.


Hi ya Revelate 

If you have the money to lock up for awhile then yeah it could be worth it 

Yuppie foodstamp ROFLOL

"Intelligence plus character--that is the goal of true education"
Last 5 apps 6/6/13


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myjourney
Posts: 26,548
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Re: penalized for not having installment loan? what does this mean


azguy13 wrote:

myjourney wrote:

gen-specific wrote:

my score is 700 today, opening one gets me to 770? lol thats a 10% increase after all

 

can you tell me more about how that works


The weight of that category is 10% but it won't necessarily add 10% (points) to your score if you have a loan thus giving you a 770 score 

You wish Lol


I would add a $1,500 loan for a 70 point boost in a heartbeat. Sadly, even if I had no prior installment loans... it MAY give me 10 points after about 2 years :smileyvery-happy:


Agreed me too Az:smileyhappy:

However the time it would take over the course of the loan I'd probably come out better by letting my cards age (AAoA) payment history increase and no new apps

"Intelligence plus character--that is the goal of true education"
Last 5 apps 6/6/13


Moderator
Revelate
Posts: 9,161
Registered: ‎12-30-2011

Re: penalized for not having installment loan? what does this mean

[ Edited ]

azguy13 wrote:

myjourney wrote:

gen-specific wrote:

my score is 700 today, opening one gets me to 770? lol thats a 10% increase after all

 

can you tell me more about how that works


The weight of that category is 10% but it won't necessarily add 10% (points) to your score if you have a loan thus giving you a 770 score 

You wish Lol


I would add a $1,500 loan for a 70 point boost in a heartbeat. Sadly, even if I had no prior installment loans... it MAY give me 10 points after about 2 years :smileyvery-happy:


I don't know about that: even under FICO 04 I went from 571 to 595 just for having a installment loan report seemingly.  People's mileage WILL vary at higher scores admittedly, but I don't think your 10 points over 2 years holds water honestly, I think it's a larger benefit than you suggest even when we're talking 760+ credit card only people when we're talking longer term: something that gets lost in the details, not every 760 even is created equally, why not make your file as strong as possible which includes a mix of tradelines if it is a trivial cost?  Scraping together $500 for call it two weeks (for money shuffling time), I'm just not seeing a massive financial hardship for most people including anyone who has a savings acount as everyone recommends... a salient point to remember, it's not like a secured credit card where that money is gone for the period of time, you get the loan value right back in the secured loan type.  Deposit $500, take out 100% LTV secured loan, wind up with $500 back in your pocket and a $7/month payment or whatever.

 

Also when we're talking things like car loans, it's a terrible idea not to have installment history on your reports... and if we ever move to the FICO 8 mortgage industry option, I shudder to think on not being possibly prepared on that one.

 

I guess frankly I don't understand: if we spend said yuppie foodstamp to look at our reports and scores, why wouldn't we spend the same one over the course of 4 years to IMPROVE our reports and scores.  It's unarguable that having installment history is a benefit even if it's possibly not immediate for the gold plated credit card set under some models.

 

ETA: lot of the security deposits earn the same interest as savings accounts would at the various institutions, other than the inflation penalty on any liquid cash asset, what's the downside?

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)
Goal Score: 700 on EQ '04 (01/01/15)


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