topic Re: Will Installment Loans Raise Credit Score?? in Rebuilding Your Credit

Will Installment Loans Raise Credit Score??

skychick1 — Wed, 24 Mar 2010 20:28:53 GMT

Hello All,

Confused, and would appreciate any assistance. Explanation for my credit score reflects that I need more diverse credit. Would a 6 month installment loan help raise my credit score? My credit union offers these, and wondering if this would be a good move.

Thank you in advance for your knowledge!

Re: Will Installment Loans Raise Credit Score??

Anonymous — Wed, 24 Mar 2010 20:31:09 GMT

If you have no other installment, then yes.

Re: Will Installment Loans Raise Credit Score??

skychick1 — Wed, 24 Mar 2010 20:34:46 GMT

Thanks once again, Mauve. You are a wealth of information!!

I love this forum!!

Re: Will Installment Loans Raise Credit Score??

Anonymous — Wed, 24 Mar 2010 20:37:17 GMT

Honestly, almost everything I know, I got from here. I've just seen this question asked before. I think mix of credit contributes to 10% of the scoring algorithm, if I remember right. Check in with "Understanding FICO scoring", they'll know more.

Re: Will Installment Loans Raise Credit Score??

Anonymous — Wed, 24 Mar 2010 20:41:44 GMT

Installment loans, other than for payment history and AAoA have little effect on your FICO score. The points you would get for utilization are very minimal.

Re: Will Installment Loans Raise Credit Score??

skychick1 — Wed, 24 Mar 2010 20:48:35 GMT

Thank you! I think at this point it will not hurt my score-I really need diversity. We shall see.......

Re: Will Installment Loans Raise Credit Score??

Anonymous — Wed, 24 Mar 2010 20:53:07 GMT

It will not hurt your score at all. And with an installment loan you will be getting a good mix of credit and may see an increase.

Re: Will Installment Loans Raise Credit Score??

skychick1 — Wed, 24 Mar 2010 20:54:38 GMT

Yay!! Thanks

Re: Will Installment Loans Raise Credit Score??

Anonymous — Wed, 24 Mar 2010 20:57:50 GMT

With a temporary ding for the inquiry - which affects your score for a year and remains on your report for 2

Re: Will Installment Loans Raise Credit Score??

creditbroke — Wed, 24 Mar 2010 21:56:45 GMT

My installment loan took me from the 5's to 6's by itself in exactly a year. Then I added a secured cc and a Best Buy card. Also recently I was added to my parents Jcpennys card to bring up my AAoA. My scores are in the mid 7's with only a years payments and couple cc accounts.

So, the loan can help you, but you should stretch it to 18 months IMO.

Re: Will Installment Loans Raise Credit Score??

skychick1 — Thu, 25 Mar 2010 05:20:08 GMT

Thanks for the info-good idea to lengthen loan.

Re: Will Installment Loans Raise Credit Score??

Anonymous — Thu, 25 Mar 2010 20:07:13 GMT

@creditbroke wrote:
My installment loan took me from the 5's to 6's by itself in exactly a year. Then I added a secured cc and a Best Buy card. Also recently I was added to my parents Jcpennys card to bring up my AAoA. My scores are in the mid 7's with only a years payments and couple cc accounts.

So, the loan can help you, but you should stretch it to 18 months IMO.

It is not the installment loan that is helping. It is the payment history and AAoA. Utilization has little effect.

Re: Will Installment Loans Raise Credit Score??

creditbroke — Thu, 25 Mar 2010 20:39:32 GMT

Considering the AAoA and payment history are a direct result of the installment loan. How do you make such a statement?

Re: Will Installment Loans Raise Credit Score??

Anonymous — Thu, 25 Mar 2010 21:10:00 GMT

What I am saying is the installment loan, in and of itself, does not have a big impact on your FICO score, whereas revolving accounts would.

Yes, I am very aware, that payment history and AAoA are directly connected to the loan. Again, that is NOT what I am talking about. Yes, if you are late, it will hurt your score, no matter what type of an account it is.

Re: Will Installment Loans Raise Credit Score??

creditbroke — Thu, 25 Mar 2010 21:47:21 GMT

A strong overall credit profile needs a mixture of both revolving and installment.

I will be in the 800+ by Xmas. And I will have an installment loan or 2 reporting.

Re: Will Installment Loans Raise Credit Score??

llecs — Thu, 25 Mar 2010 21:56:26 GMT

Installment loans are a tiny part of FICO scoring. They only count in your credit mix if a balance is reporting and they are open. I paid off my last installment last year. I pulled both my EQ and TU FICO scores the day before it reported paid and again on the day it updated to $0. My EQ went up 7 points (or 8?) and my TU FICO dropped 5. In other words, that loan helped TU due to the subsequent drop and it hurt EQ (as seen by the increase).

Re: Will Installment Loans Raise Credit Score??

creditbroke — Thu, 25 Mar 2010 22:23:09 GMT

They need to stretched out as many months as possible, this will give you the lowest monthly reported debt and the longest useable life of the loan.

Re: Will Installment Loans Raise Credit Score??

fused — Thu, 25 Mar 2010 22:58:29 GMT

@creditbroke wrote:

A strong overall credit profile needs a mixture of both revolving and installment.

I will be in the 800+ by Xmas. And I will have an installment loan or 2 reporting.

I do NOT have an installment account, and my scores are well over 800.