Reply
Community Leader
Valued Contributor
azguy13
Posts: 5,381
Registered: ‎04-30-2013
0

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


Revelate wrote:

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?


I am not arguing that it wouldn't help. I am simply stating that I personally would not go out of my way to take out a loan I do not need just so I can add some points to my scores. Yes, I understand the need for prior installment history when applying for an auto loan, I just would not take out any credit I do not need and pay any interest on it. 

 

Plus, to be realistic, not many people have 760+ without having any previous installment history. I feel the benefit would be with scores in the 500s through mid/high 600s. 




NFCU Flagship $25,000 I AMEX SPG $23,000 I Chase Sapphire Preferred $17,500 I Discover IT $12,000 I
Moderator
Revelate
Posts: 9,731
Registered: ‎12-30-2011
0

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

[ Edited ]

azguy13 wrote:

Revelate wrote:

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?


I am not arguing that it wouldn't help. I am simply stating that I personally would not go out of my way to take out a loan I do not need just so I can add some points to my scores. Yes, I understand the need for prior installment history when applying for an auto loan, I just would not take out any credit I do not need and pay any interest on it. 

 

Plus, to be realistic, not many people have 760+ without having any previous installment history. I feel the benefit would be with scores in the 500s through mid/high 600s. 


Sure, and how much is a waste of $20?  I've given away far more than that on things not remotely as important as a FICO score.  I don't recommend someone finance a car they don't need necessarily (though financing a car they do need, well I did that even if it cost me more in the short term) but when we're talking about the share secured loan route, I don't think anyone's that frugal, and that rational analysis would find many many more $20's spent unnecessarily during any 4ish year span.

 

That's my point underlying it, if we agree that it's a benefit, at some point the cost is trivial, and I'm suggesting it should be for virtually anyone who has really taken a look at their personal finances.

 

ETA: oh I was off, it's actually $0.68 over a yuppie food stamp.  Seriously $20.68 spent over 4 years isn't trivial?  Done twice for FICO completeness at $41.36?

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)


Take the myFICO Fitness Challenge
Frequent Contributor
gen-specific
Posts: 329
Registered: ‎02-27-2013
0

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

[ Edited ]

hey guys

 

so I am able to fluctuate my credit scores nearly 100 points over the course of one quarter, so I'll make my own decision about the costs and stuff, thanks for all the insight so far

 

I have a credit line, wouldn't that count as an installment loan? I've only floated a balance for maybe two months in the past

 

I would consider a small secured line of a different type. does seem redundant but I've done more convulated things for my business entities to gain their own credit history

Citi Thank You Premier 60k, AMEX Blue 30k, Chase Sapphire Preferred 30k, BoA VISA Rewards 30k, Wells Fargo 30k, Barclays Arrival+ 30k, 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
Valued Member
JCSC
Posts: 28
Registered: ‎10-20-2012
0

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

I would not agree with getting a secured installment loan. I have one and it reports as "deposit related" and almost looks as if it counts negatively against my score. The comment of not having an installment loan is also present in my report.
Starting Scores 11/12: EQ 540 TU? EX?
Current Scores
04/18 myfico EQ FICO 662
01/19 myfico TU FICO 593
01/13 lender pull EX FICO 522
Next Goal Mid score 675
Frequent Contributor
gen-specific
Posts: 329
Registered: ‎02-27-2013
0

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


JCSC wrote:
I would not agree with getting a secured installment loan. I have one and it reports as "deposit related" and almost looks as if it counts negatively against my score. The comment of not having an installment loan is also present in my report.

thanks for that insight

 

 

so I do not have any need for a car loan or a mortgage, and I have a unsecured line of credit so.... what else is there!?!? There is no way in hell I am going to get a real loan for no reason

Citi Thank You Premier 60k, AMEX Blue 30k, Chase Sapphire Preferred 30k, BoA VISA Rewards 30k, Wells Fargo 30k, Barclays Arrival+ 30k, 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
Super Contributor
mongstradamus
Posts: 7,357
Registered: ‎06-19-2013
0

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


gen-specific wrote:

JCSC wrote:
I would not agree with getting a secured installment loan. I have one and it reports as "deposit related" and almost looks as if it counts negatively against my score. The comment of not having an installment loan is also present in my report.

thanks for that insight

 

 

so I do not have any need for a car loan or a mortgage, and I have a unsecured line of credit so.... what else is there!?!? There is no way in hell I am going to get a real loan for no reason


Its only ten percent of your overall score , just fix the other parts of your report or just be patient 


EX Fico 782 9/25/14 Fako 801 CS/Credit.com 11/24/14
EQ SW 823 quizzle fako 796 7/19/14
TU Fico 808 Fako 787 Creditkarma 11/24/2014
Established Contributor
jamie123
Posts: 922
Registered: ‎03-22-2012

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


gen-specific wrote:

JCSC wrote:
I would not agree with getting a secured installment loan. I have one and it reports as "deposit related" and almost looks as if it counts negatively against my score. The comment of not having an installment loan is also present in my report.

thanks for that insight

 

 

so I do not have any need for a car loan or a mortgage, and I have a unsecured line of credit so.... what else is there!?!? There is no way in hell I am going to get a real loan for no reason


It is really easy to do and there are three good credit unions to get a shared loan from and they are:

 

Alliant Credit Union

State Department Federal Credit Union (SDFCU)

Digital Credit Union (DCU)

 

I am currently in the process of opening one with Alliant. To become a qualified person that is able to join, I first had to make a $10 donation to a charity that is listed on their website. I was then able to join and open a savings account. I then funded that account with a $500 electronic deposit from my bank. This took all of 1 hour to do.

 

I am now waiting for the funds to clear and become available so that I can take out a 5 year loan @ 3.7% yearly interest rate for $500. (4 year and under loans are only 2.7% interest) They send me my $500 back as the loan! I'm not out anything really!

 

Once I have the loan in place I will set up reccuring electronic payments to pay the loan once a month for 60 payments and I can forget about it. For the next 5 years it will take care of itself while adding points to my score. (The payments will only be somewhere in the $7 to $8 range.)

 

Then I will take the same $500 and open an account and get a loan with SDFCU.

 

I will then have two 5 year installment loans and it really didn't cost me anything.

 

P.S. I learned how to do this from Revelate! Awesome advice!

 



Starting Score: EQ 658 6/18/12
Current Score: EQ 690 11/17/14 - EX 687 7/21/14 - TU 682 7/21/14
Goal Score: EQ 720+
Take the FICO Fitness Challenge

Established Contributor
jamie123
Posts: 922
Registered: ‎03-22-2012
0

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


mongstradamus wrote:

gen-specific wrote:

JCSC wrote:
I would not agree with getting a secured installment loan. I have one and it reports as "deposit related" and almost looks as if it counts negatively against my score. The comment of not having an installment loan is also present in my report.

thanks for that insight

 

 

so I do not have any need for a car loan or a mortgage, and I have a unsecured line of credit so.... what else is there!?!? There is no way in hell I am going to get a real loan for no reason


Its only ten percent of your overall score , just fix the other parts of your report or just be patient 


Ten percent of your score is not trivial!

 

Let's do the math. Now I know someone is going to say "But FICO starts at 350!" so we will do it both ways.

 

850 X .10 = 85 points

 

850 - 350 = 500 X .10 = 50 points

 

So even if we are conservative you are leaving 50 points on the table if you don't have an installment loan on your reports.

 

Now I also understand that you or I may not see ALL 50 points by getting an installment loan but I would be more than happy with a 20 to 25 point bump!



Starting Score: EQ 658 6/18/12
Current Score: EQ 690 11/17/14 - EX 687 7/21/14 - TU 682 7/21/14
Goal Score: EQ 720+
Take the FICO Fitness Challenge

Frequent Contributor
gen-specific
Posts: 329
Registered: ‎02-27-2013
0

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


jamie123 wrote:

mongstradamus wrote:

gen-specific wrote:

JCSC wrote:
I would not agree with getting a secured installment loan. I have one and it reports as "deposit related" and almost looks as if it counts negatively against my score. The comment of not having an installment loan is also present in my report.

thanks for that insight

 

 

so I do not have any need for a car loan or a mortgage, and I have a unsecured line of credit so.... what else is there!?!? There is no way in hell I am going to get a real loan for no reason


Its only ten percent of your overall score , just fix the other parts of your report or just be patient 


Ten percent of your score is not trivial!

 

Let's do the math. Now I know someone is going to say "But FICO starts at 350!" so we will do it both ways.

 

850 X .10 = 85 points

 

850 - 350 = 500 X .10 = 50 points

 

So even if we are conservative you are leaving 50 points on the table if you don't have an installment loan on your reports.

 

Now I also understand that you or I may not see ALL 50 points by getting an installment loan but I would be more than happy with a 20 to 25 point bump!


 

Hey Jamie123 thanks for your contributions to this thread and thanks for doing the math! Even without anyone being able to know how the delta T (time) variable factors in to these credit score percentages, I think your points are worthwhile

Citi Thank You Premier 60k, AMEX Blue 30k, Chase Sapphire Preferred 30k, BoA VISA Rewards 30k, Wells Fargo 30k, Barclays Arrival+ 30k, 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
Established Contributor
jamie123
Posts: 922
Registered: ‎03-22-2012
0

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

[ Edited ]

If you read the forums you will find that once people pay their auto loans off that their score actually drops a bit. They still have the installment loan on their reports but it must not count as much once it is closed.

 

The beauty of these $500 shared loans is that they have a long 5 year term but the monthly payment is only $7 to $8 so they don't affect your DTI ratio at all. You can mortgage shop with a couple of extra points these open loans will give you without having it affect the size of the mortgage you would qualify for like an open auto loan of a few hundred dollars would.



Starting Score: EQ 658 6/18/12
Current Score: EQ 690 11/17/14 - EX 687 7/21/14 - TU 682 7/21/14
Goal Score: EQ 720+
Take the FICO Fitness Challenge


myFICO is the consumer division of FICO. Since its introduction 20 years ago, the FICO® Score has become a global standard for measuring credit risk in the banking, mortgage, credit card, auto and retail industries. 90 of the top 100 largest U.S. financial institutions use the FICO Score to make consumer credit decisions.

>> About myFICO
FICO Score - The Score that matters
Click to Verify - This site chose VeriSign SSL for secure e-commerce and confidential communications.
Fair Isaac Corporation is a BBB Accredited Financial Service in San Rafael, CA
FOLLOW US Social Media Facebook Twitter Pinterest Google+
}