@drewricomakeubu wrote:How important is having installment credit on your report?
Currently all my active credit is revolving credit/CC. I just got approved for BCP and I'm the letter it said current score was 778 and things hurting my score is no recent installment credit.
How important is installment stuff and what's it effect on getting decent SLs? If it is pretty important, what would be a good strategy to get installment activity on my report?
I have a closed mortgage on my account that was paid off in 2016 and that's the only thing I've got in those terms.
I've seen the same message for years and am consistently in the 800s. At this stage in my life, the mortgage is paid off, the cars are paid off, and my only open credit are cards. Honestly, I believe that matters much more for a thin profile than a thick profile. And remember too that the closed accounts continue as a factor for ten years as long as they were closed in good standing.
An installment loan does tweak scores when %$ remaining is low. On the tail end (payoff) of the installment there will be a score drop a similar amount as the gain.
If for some reason someone wants to squeeze out as much score as possible I guess it may be worth the effort. It's possible to get very good and excellent scores without any loans also. EG: I've never had a mortgage and only one installment loan which I closed within a couple months after opening.
There are products from a few FI that offer installment loans that you can pay down to the sweetspot %, get the score perk and the prepayment extends the next due date into the distant future.
Here you will see a few forum threads about SSL (Savings/Share Secured Loan) Pledge loans, etc.
@drewricomakeubu wrote:How important is having installment credit on your report?
Currently all my active credit is revolving credit/CC. I just got approved for BCP and I'm the letter it said current score was 778 and things hurting my score is no recent installment credit.
How important is installment stuff and what's it effect on getting decent SLs? If it is pretty important, what would be a good strategy to get installment activity on my report?
I have a closed mortgage on my account that was paid off in 2016 and that's the only thing I've got in those terms.
Unfortunately, some of the FICO score models have a penalty for no open loans. It's ridiculous, but it's there.
Personally, in your shoes I wouldn't worry about it. People have gotten 850 scores without any open loans. And no, the absence of an open installment loan would not hurt the size of your starting credit limits. It would actually help, since having an installment loan increases your debt to income ratio. And no, it doesn't presently affect your credit mix, since the closed mortgage has you covered on the subject of installment loans. However, when the mortgage drops off your reports, if there are no other closed loans, it would affect credit mix. But I have no idea how many points that would cost.
The most painless way to get rid of that penalty is to open a share secured loan at NFCU or PenFed with a 60 month payout. Deposit $3100 or so in savings, take out a 60-month share secured loan secured by the savings account (with minimal interest and no hard credit pull), immediately pay the loan down to 9% of the original loan amount with money from the savings account, and then slowly pay the balance off over 5 years.
I'm also in the camp of with your scores, I wouldn't be concerned with it whatsoever. I know plenty of people with near 850 scores with 3 credit cards and no open loans on their file. I think they need to list something as what's "hurting" your scores but in reality, your scores aren't hurting. As you probably already know, when you get a loan, your scores will drop. As you have the loan they will creep up as the balance goes down below certain thresholds. Then when you pay it off, you get a "penalty" of "no open installment loan" again.... Other than being important to someone who is new to credit, or has a very thin file who is trying to add substance to their file, to me, it's merely something else that's unnecessary to keep up with. If you just have to have one on your file to make you feel better, I'd look at an SSL loan as other have suggested. Just my 2¢
