topic Re: Should I get an installment loan? in Understanding FICO® Scoring

Should I get an installment loan?

Anonymous — Wed, 23 Dec 2015 06:09:59 GMT

I'm trying to maximize my mortgage FICO scores - husband and I are looking to purchase a home this summer.

I have credit cards but zero installment loans or auto loans or anything else.

Should I add an installment loan just to up my scores? I'm trying to eek out a 740 mid score and am in the low-mid 700s right now.

Current util on cards is about 2% just to let something report. AAoA isn't great but husband just added me as an AU to his credit card he's had forever - hoping I get the age added to my mix and that gives me a few points...

Re: Should I get an installment loan?

Anonymous — Wed, 23 Dec 2015 13:17:49 GMT

I would, read this thread, http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Installment-tradeline-utilization-thread/td-p/4055989

Basically, you would get a secured shared $500 loan from either Alliant FCU or SDFCU for five years. Then pay it forward till there is approx. $45 balance. Then let it sit there for four years. This will increase your score if you have no active, installment (student, auto, mortgage) loan on your credit report.

However, give some of the other seasoned members a chance to comment before moving forward.

Re: Should I get an installment loan?

Anonymous — Wed, 23 Dec 2015 16:33:48 GMT

Yes, given that both of the following are true....

* You have never had an installment loan, and

* You need to increase your score for a home purchase targeted six months from now.

then adding a four-year $500 Share Secure loan is the right thing to do. It's also crucial to select a lender that will allow you (a) to pay off most but not all of the principal early in the life cycle of the loan (and at least a couple months before you need your scores maximized) and (b) still keep the loan open the full term of the loan. Minimally you do not want the loan to close until after you own your new home. alliant is one lender people here report being friendly to this approach.

Thanks to SlimShady for suggesting this.

Also, your idea of being added as an AU will indeed help your score (assuming that the balance on tthe AU account is kept very low). But... and this is important... for some mortgage lenders, the presence of an AU account on your reports will be an obstacle, since of course the AU account is there precisiely to artificially inflate your score. That alters their ability to accurately assess your risk -- or that's how some lenders see it. Thus some might object to it. You can always take the AU account off, but I would spend a couple months investigating this question so you can make the right decision. No need to take it off right away until you know, however.

There are other easy tricks for getting extra points. These include things like making sure that each of you (husband and wife) have exactly one credit card that reports a positive balance, that all others cards report a $0 balance, and that the one positive balance that does report is small ($10-20 bucks makes it easy, but all you are aiming for is < 5% of your total utilization). And of course, except for possibly opening the Share Secure loan, open NO MORE ACCOUNTS of any kind.

Re: Should I get an installment loan?

Anonymous — Thu, 24 Dec 2015 07:16:08 GMT

Thanks for the help!!

I wasn't sure if opening the Alliant loan would be okay since we are about 6 months away from a possible home purchase. But I guess what's the difference since I have recently opened ccs anyway? I think it is so strange to open a $500 loan (although pay 91% of it down) to help my scores.

CRAs are crazy.

Re: Should I get an installment loan?

Anonymous — Thu, 24 Dec 2015 13:58:00 GMT

Well yes they are, however in this case, it's the FICO calculation that is crazy.

Agree with CreditGuyInDixie on the AU, you already have it on your credit report, might as well keep it unless the loan officiers require your remove it.

The shared secure loan is the way to go and will not result in a hard inquiry on your report.

The zero balance on all but one card trick is something that can be used a month before you start applying for the mortgage loan.

Good Luck, Merry Xmas!

Re: Should I get an installment loan?

NRB525 — Fri, 25 Dec 2015 16:52:01 GMT

OP, in your siggy, your FICO 8 scores are listed as 660, 673, 701. What is causing the 660 and 673? What are the negatives?

Have you gotten Mortgage versions of FICO scores to see where those are now? Either from a broker or through the 3B here?

+1 to the idea of using a share secured loan $500 to try to boost your score, however without more specific information about where your file is in total, it would be too early to suggest you could be at 740. The SSL is not going to boost you from 660 to 740, for example.

Re: Should I get an installment loan?

damac2004 — Fri, 25 Dec 2015 20:40:41 GMT

i did this months ago before reading about that alliant loan, thinking i needed a mix with no installment loans.

i took a score hit when the first one reported, i got a second one that reported but didn't show any score changes and it had a lower balance.

i'm only into the loans for a few months now. my last report says my installment loans balance to loan are high and hurting my scores. the credit mix changed to good.

i am not seeing a benefit score wise yet? i figured it was more of a long term thing that needs to age and will help with other loans down the line.

Re: Should I get an installment loan?

NRB525 — Fri, 25 Dec 2015 21:08:02 GMT

@damac2004 wrote:
i did this months ago before reading about that alliant loan, thinking i needed a mix with no installment loans.

i took a score hit when the first one reported, i got a second one that reported but didn't show any score changes and it had a lower balance.

i'm only into the loans for a few months now. my last report says my installment loans balance to loan are high and hurting my scores. the credit mix changed to good.

i am not seeing a benefit score wise yet? i figured it was more of a long term thing that needs to age and will help with other loans down the line.

What is the utilization percentage on each loan? I moved mine to 90% immediately, for first report, and have not gotten to 80% yet.

Re: Should I get an installment loan?

Anonymous — Sat, 26 Dec 2015 05:53:18 GMT

NRB525 -

(Sorry, don't know how to quote/reply via the app.)

The scores in my siggy are from before my student loans were dropped from my CRAs. My loans are fully paid and closed but I disputrd some reported lates. Since the loan is closed and the loan co is no longer servicing loans, the CRAs just deleted the tradelines. NOT what I was expecting since it was 3 tradelines on each CRA from 2004. It really hurt my AAoA but jumped my scores significantly into the mid/low 700s which is where they are now.

Anyway thanks for the advice! I didnt realize the Alliant thing wouldn't generate another hard inq.

And the AU line hasnt begun reporting yet. We are co-owners of the checking account in the credit union ao I'm hoping it makes sense that I be an AU on my husband's CC with them. The tradeline is from 2002, impeccable payment history.

So for the Alliant loan - should I open it now so it is reporting for a while to maximize the point increase, or wait until closer to summer?

Thanks again for all the help!! And hope you all had a very Merry Christmas!!

Re: Should I get an installment loan?

Imperfectfuture — Sat, 26 Dec 2015 06:05:01 GMT

Open on Saturday or Monday. Then, do three months payments, then pay off to 45. My credit union will not allow this, so I just keep for the long term. I have no plans for mortgage.

Re: Should I get an installment loan?

Anonymous — Sat, 26 Dec 2015 14:23:04 GMT

+1 to eveything InperfectF just said, including timing.

Bear in mind that there are two different factors that this strategy will benefit.

(1) CREDIT MIX: Having an open installment loan.

(2) AMOUNTS OWED: % of your total open installment loan that has been paid off.

With #1, you will benefit because you have never had an installment loan loan of any kind (open or closed). With #2, you will get a lot of points for having open I-debt but having paid off most (but not all) of it. Right now you get no FICO points for #2.

It's crucial to understand WHY a strategy works. Otherwise, for example, the people who read this thread could think that all they have to do is use this trick and their score will go up. It won't necessarily. This strategy is designed to benefit people who have no open installment loans. If someone already has one, this won't give them any help.

Re: Should I get an installment loan?

Anonymous — Sat, 26 Dec 2015 23:39:12 GMT

Hi Everyone,

Merry Christmas and I have one question that kinda bothers me. In December I made my last car loan payment according to all terms (no pre-payments), so now I technically have zero installment loans. Should I go for another small one like Alliant CU?

Re: Should I get an installment loan?

Anonymous — Sat, 26 Dec 2015 23:51:36 GMT

@Anonymous wrote:
Hi Everyone,
Merry Christmas and I have one question that kinda bothers me. In December I made my last car loan payment according to all terms (no pre-payments), so now I technically have zero installment loans. Should I go for another small one like Alliant CU?

Hi SmartCredit. It all depends on what you want to achieve. For example, do you have any big credit needs coming up soon? Like a home purchase, say? If so when?

It also depends on whether you had any other open installment loans, besides the car loan. For example, a student loan, or a mortgage, or a personal loan. If you did, then adding a Share Secure loan won't help you. (Read through my posts on this thread where I explain why that is the case.)

Do you have any way of monitoring your credit score? If so, it might be interesting to look at your score a month before you paid off the loan, and also two months after you paid it it off, and see how much of a change there is. Maybe it's not a big deal in your case.

Re: Should I get an installment loan?

Anonymous — Sun, 27 Dec 2015 00:02:58 GMT

@Anonymous wrote:
@Anonymous wrote:
Hi Everyone,
Merry Christmas and I have one question that kinda bothers me. In December I made my last car loan payment according to all terms (no pre-payments), so now I technically have zero installment loans. Should I go for another small one like Alliant CU?
Hi SmartCredit. It all depends on what you want to achieve. For example, do you have any big credit needs coming up soon? Like a home purchase, say? If so when?

It also depends on whether you had any other open installment loans, besides the car loan. For example, a student loan, or a mortgage, or a personal loan. If you did, then adding a Share Secure loan won't help you. (Read through my posts on this thread where I explain why that is the case.)

Do you have any way of monitoring your credit score? If so, it might be interesting to look at your score a month before you paid off the loan, and also two months after you paid it it off, and see how much of a change there is. Maybe it's not a big deal in your case.

Thanks for reply. My goal is to purchase a new vehicle sometime next year. Unfortunately I have BK reporting on my file. That is the main issue. Current scores are around 650ish area

Re: Should I get an installment loan?

Anonymous — Sun, 27 Dec 2015 00:17:00 GMT

Well, certainly the BK will be the huge drag on the score.

Can't really comment on how how much help an SS loan could be until you answer the other questions:

* Did you have any other open installment loans, besides the car loan? For example, a student loan, or a mortgage, or a personal loan. If you did, then adding a Share Secure loan won't help you.

* Do you have any way of monitoring your credit score? If so, it might be interesting to look at your score a month before you paid off the loan, and also two months after you paid it it off, and see how much of a change there is.

Re: Should I get an installment loan?

Anonymous — Sun, 27 Dec 2015 04:23:16 GMT

Thanks for the help!

I'm going to open one on Monday. My next quarterly report is Feb so I'm really curious to see my mortgage scores. I last got my report in Nov which began all the disputing so I'm hoping to see dramatic change.

Re: Should I get an installment loan?

CreditDunce — Sun, 27 Dec 2015 17:17:26 GMT

I will defer to the more experienced members here. However, I do not think having an open installment loan is necessary with EQ-04 and TU-04 scores. As long as you have a closed installment loan on your , FICO will be happy. Adding a new installment loan could reduce your AAoA.

The last FICO score used by most mortgages EX-98 will be helped with an open installment loan that is mostly paid.

Re: Should I get an installment loan?

Anonymous — Sun, 27 Dec 2015 18:41:11 GMT

@CreditDunce wrote:
I will defer to the more experienced members here. However, I do not think having an open installment loan is necessary with EQ-04 and TU-04 scores. As long as you have a closed installment loan on your , FICO will be happy. Adding a new installment loan could reduce your AAoA.

The last FICO score used by most mortgages EX-98 will be helped with an open installment loan that is mostly paid.

Hey CD! The OP (WestRiver) has no installment loans of any kind on her profile, open or closed. I checked with her about that early in the thread. ("Given that you have never had an installment loan....")

So adding an installment loan now should be a help to her, regardless of the model, since it will substantially improve her Credit Mix.

Re: Should I get an installment loan?

NRB525 — Sun, 27 Dec 2015 19:20:10 GMT

@Anonymous wrote:
NRB525 -

(Sorry, don't know how to quote/reply via the app.)

The scores in my siggy are from before my student loans were dropped from my CRAs. My loans are fully paid and closed but I disputrd some reported lates. Since the loan is closed and the loan co is no longer servicing loans, the CRAs just deleted the tradelines. NOT what I was expecting since it was 3 tradelines on each CRA from 2004. It really hurt my AAoA but jumped my scores significantly into the mid/low 700s which is where they are now.

When you Reply, there is a "Quote" button to the upper right of the text box where you type, unless you are on a phone/mobile.

So the scores in your siggy are not up to date even though they say December 2015?

Re: Should I get an installment loan?

Anonymous — Sun, 27 Dec 2015 20:32:43 GMT

Hi Credit Dunce - as Mr. Dixie said, I dont have any installment loans anymore. I had 3 student loans that were completely removed from my accounts. (Although oddly enough I noticed that on EQ they are showing as THERE, but there is no reported payment history. The CRA wiped the history but left the account - but my AAoA dropped significantly so I can only assume it is not reporting.)

NRB525 - Unfortunately I am always replying on my phone lately so no quoting for me.
Anyway the scores in my siggy are not up to date. I put them in before the results of my disputes were in. Currently I'm at 720, 730 and 701. Although those are my FICO 8 and I won't know about my mortgage scores until Feb. I've heard the mortgage scores are more sensitive to account mix.

I am worried about the installment line affecting my AAoA. Since my student loans were wiped my av age went from 6 years to 1 year.

But I am hoping the installment loan will provide more of a point boost than the dip in my AAoA. (And again, that's where I'm hoping my husband's cc that I asked to be an AU on will help.)