Personal Loan: How to maximize positive impact on score

[Anonymous]

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@Anonymous wrote:

Great response as always by SouthJ.  A few more thoughts.

You write:

My last installment was an auto loan that I paid off about 3 years ago. Hopefully, I won't need another one for a few years (I was planning to buy my next car used and outright). And I'll probably never have another mortgage. 

Could that possibly mean that you do have a mortgage now?

In these kinds of conversations, people will often say that they don't have any open installment loans, and then after several more posts we find out that they do have student loans or a mortgage.  Just to be 100% clear, when we say "installment loan" that includes personal loans, mortgages, student loans, car loans, financing from Rooms To Go for the sofa you just bought from them, etc.

The SS loan technique only helps you if you have no open installment loans of any kind.  If you have an open mortgage it's extremely likely the technique would not help you.

And SS there stands for Share Secure (which you also ask about).

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No. I am not currently on any mortgage. I did have a mortgage when I was married, but my ex refinanced and my name was taken off of it. I currently rent and have no plans to buy another house (maybe a condo some day, but not for a few years). So for now, it's just the 3 credit cards. 1 that I use for all life purchases and pay in full every month. One with a 25% usuage, which I need to get off ASAP, and one that I used for a 0% balance transfer (to pay down the 2nd card) which is almost at 100% utilization that I also plan to have paid off within 3 months. 

After that, I'd like to buy out a silent business partner and thought I might take out a personal line of credit (or a simple $20k loan) to do this. It would be cheaper than what I'm paying him now. That's neither here nor there (I'm not asking for business advice), but was curious if my taking out a $20k installment loan could help my FICO score if I could pay down most of the balance quickly enough. 

Anyway, it's impressive how knowledgeable you guys are and I will take SouthJ's (and your) advice. Thanks!

[Anonymous]

iwan2,

Off topic here, but what is your goal score in your sig lower than your current score?

[Anonymous]

Great to hear, iwan2!  My comments in green below.

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@Anonymous wrote:

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No. I am not currently on any mortgage. I did have a mortgage when I was married, but my ex refinanced and my name was taken off of it. I currently rent and have no plans to buy another house (maybe a condo some day, but not for a few years).

Very clear.  Thanks.  Then you would be a great candidate for the Alliant SS loan.  I encourage you to read through the first couple posts in that thread, which I include again here for your convenience:

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secure-technique/m-p/4506756

So for now, it's just the 3 credit cards. 1 that I use for all life purchases and pay in full every month. One with a 25% usuage, which I need to get off ASAP, and one that I used for a 0% balance transfer (to pay down the 2nd card) which is almost at 100% utilization that I also plan to have paid off within 3 months. 

I think it is great that you are paying off all three cards (amazingly good choice) and then will be using one card moving ahead that you plan to pay in full each month (also amazingly good choice).  PIF is the way to go.  Just bear in mind that paying in full does not necessarily involve having a low utilization, which you should also be looking for.  If you tell BBS or SouthJ what your credit limits are on all three cards (total credit limit) and your typical monthly CC spend, then they can let you know whether you are set or whether you need to take extra steps to keep your total util low.

After that, I'd like to buy out a silent business partner and thought I might take out a personal line of credit (or a simple $20k loan) to do this. It would be cheaper than what I'm paying him now. That's neither here nor there (I'm not asking for business advice), but was curious if my taking out a $20k installment loan could help my FICO score if I could pay down most of the balance quickly enough. 

Your best plan would be first to pay down your cards, wait for the new paid-off CC balances to appear on your credit reports, and then take out a $500 SS loan with Alliant, using the technique as described in the guidance.  Once you have executed all the steps listed in the guidance, your score will be much higher -- and then you can decide if you want to take out an unsecured 20k loan.  That big unsecured loan should be purely about achieving financial goals for yourself -- it should NOT be about a credit scoring benefit.  The way I suggested just now, you will already have achieved your credit score boost with the SS loan.

Anyway, it's impressive how knowledgeable you guys are and I will take SouthJ's (and your) advice. Thanks!

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[Anonymous]

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@Anonymous wrote:

Great to hear, iwan2!  My comments in green below.

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@Anonymous wrote:

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http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secure-technique/m-p/4506756

Thanks again for the link. I will definitely read that whole thread. Just a brief skimming looks like there's a wealth of information in it!  

Just bear in mind that paying in full does not necessarily involve having a low utilization, which you should also be looking for. 

I realize this, which is why after I pay everything off I'm going to switch to the credit card with the highest credit limit for my cost of living expenses. Currently, that's not what I'm doing, but only because I'm attempting to pay as little interest as possible. Once everything is paid down then I'll switch which card I use. 

If you tell BBS or SouthJ what your credit limits are on all three cards (total credit limit) and your typical monthly CC spend, then they can let you know whether you are set or whether you need to take extra steps to keep your total util low.

Not sure if either are still paying attention to my comments (I didn't mean to hijack this thread). But one is a Citibank Mastercard, which has a $11,500 credit line (which currently has a $2800 balance at 12.15% APR). My other is a Discover Card, which has only a $3500 credit line (and a $3,300 balance at 0% APR for 12 months, which then goes to 23.24%). I have a Capital One business card (this is the one I'm currently using for expenses and paying off every month), which has anywhere from $1000 to $1300 balance that is paid in full each month. The credit line is only $2800 (it's tied to my business) and has a 23.15% APR. 

I also have a CareCredit, which is a dental line of credit with a zero balance and I want to say it's less than a $1000 credit line which I haven't used in forever, but it's still an open account. 

So I think I understand what my best strategy is at this point. To pay off the $2800 I'm paying interest on even though I realize it hurts me that the Discover card is almost at 100% utilization, which hurts my score. But I have a thing about paying interest on stuff I'm not even using anymore -lol. So that's #1 priority. Then I'm going to pay down the Discover even though it's a 0% interest to at least a $30 balance or so. Finally, I'll stop using Capital One altogether and start using my citibank for purchases, since even at $1000/mo utilization will never be much more than 10% on that card. Think that's my best strategy? 

Your best plan would be first to pay down your cards, wait for the new paid-off CC balances to appear on your credit reports, and then take out a $500 SS loan with Alliant, using the technique as described in the guidance.

I'll definitely research those techniques! I really appreciate the advice and sorry about hijacking this thread. You guys are great!

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[Anonymous]

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@Anonymous wrote:

iwan2,

Off topic here, but what is your goal score in your sig lower than your current score?

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It's been a while since I've been on here. That was my goal about a year ago. I updated my current score, but forgot to set a new goal. TBH, I'm not even sure what it should be or what's realistic. When I pay off my credit cards I'm hoping to pick up a few points, but there's only so much you can do, right? I'll take CreditGuyInDixie's advice and look into that $500 SS aliant installment loan. First I need to read the link. These forums are really the best when it comes to getting the best advice. Real happy to have found it. Hopefully, one day I can give back and contribute with knowledgeable advice. 

[Anonymous]

Your plans sound great.  Really great!  A few more thoughts....

You write:

I have a Capital One business card (this is the one I'm currently using for expenses and paying off every month), which has anywhere from $1000 to $1300 balance that is paid in full each month. The credit line is only $2800 (it's tied to my business) and has a 23.15% APR. 

Capital One is an unusual issuer in that its business credit cards are reported to a consumer's personal credit file, just as though they were normal personal credit cards.  Most other major issuers do not do this with their business cards (Amex, Bank of America, Chase, Citibank, etc.).

Nothing for you to do one way or the other here.  Just letting you know that you are right to count your Cap 1 business card as part of your personal credit file (including utilization, etc.) but way down the road if you ever get another business card you may not need to do that.

You also write:

Finally, I'll stop using Capital One altogether and start using my citibank for purchases, since even at $1000/mo utilization will never be much more than 10% on that card.

I would definitely not stop using any of your cards altogether.  It's fine not to use them for a long time, but I would still use them once every six months, just so the issuer knows you are still alive.  Otherwise the card might get cancelled by the issuer.  Once every 11 months is probably plenty safe, but why not make it easy to remember and do it roughly once every six months?

Also bear in mind that you get to consider your total credit limit when calculating utilization.  Yours is $17,800 (maybe a tiny bit more if the CareCredit account is counted).  So even if your reported balances go up to $1500 you will still be well under 9%.  Per-card utilization does matter, but only when it gets very high.  Your per card util will always be well under 29%.

Best of luck, bud.

[SouthJamaica]

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@Anonymous wrote:

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@Anonymous wrote:

Great to hear, iwan2!  My comments in green below.

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@Anonymous wrote:

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http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secure-technique/m-p/4506756

Thanks again for the link. I will definitely read that whole thread. Just a brief skimming looks like there's a wealth of information in it!  

Just bear in mind that paying in full does not necessarily involve having a low utilization, which you should also be looking for. 

I realize this, which is why after I pay everything off I'm going to switch to the credit card with the highest credit limit for my cost of living expenses. Currently, that's not what I'm doing, but only because I'm attempting to pay as little interest as possible. Once everything is paid down then I'll switch which card I use. 

If you tell BBS or SouthJ what your credit limits are on all three cards (total credit limit) and your typical monthly CC spend, then they can let you know whether you are set or whether you need to take extra steps to keep your total util low.

Not sure if either are still paying attention to my comments (I didn't mean to hijack this thread). But one is a Citibank Mastercard, which has a $11,500 credit line (which currently has a $2800 balance at 12.15% APR). My other is a Discover Card, which has only a $3500 credit line (and a $3,300 balance at 0% APR for 12 months, which then goes to 23.24%). I have a Capital One business card (this is the one I'm currently using for expenses and paying off every month), which has anywhere from $1000 to $1300 balance that is paid in full each month. The credit line is only $2800 (it's tied to my business) and has a 23.15% APR. 

I also have a CareCredit, which is a dental line of credit with a zero balance and I want to say it's less than a $1000 credit line which I haven't used in forever, but it's still an open account. 

So I think I understand what my best strategy is at this point. To pay off the $2800 I'm paying interest on even though I realize it hurts me that the Discover card is almost at 100% utilization, which hurts my score. But I have a thing about paying interest on stuff I'm not even using anymore -lol. So that's #1 priority. Then I'm going to pay down the Discover even though it's a 0% interest to at least a $30 balance or so. Finally, I'll stop using Capital One altogether and start using my citibank for purchases, since even at $1000/mo utilization will never be much more than 10% on that card. Think that's my best strategy? 

Your best plan would be first to pay down your cards, wait for the new paid-off CC balances to appear on your credit reports, and then take out a $500 SS loan with Alliant, using the technique as described in the guidance.

I'll definitely research those techniques! I really appreciate the advice and sorry about hijacking this thread. You guys are great!

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If the Capital One Spark card is your only business card, and you have a business, then you should keep on using it. It's a great card anyway, unless you don't like a business card that reports on your personal credit.

Bear in mind that utilization is almost always based on the statement balance, so if you pay it off before the statement cut, it won't be an issue.

You should get that Discover card below $3150, I don't care whether you're paying zero interest or not. A maxed card is murder.

[heavyjay]

This has been a most informative topic. I just took out a loan with Sofi and this thread has taught me a lot. While I'm not in a position to immediately pay it down to 9%, I'll be able to pay 33% of it back immediately. Many thanks to all who have contributed so far.

[Anonymous]

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@SouthJamaica wrote:

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@Anonymous wrote:

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@Anonymous wrote:

Great to hear, iwan2!  My comments in green below.

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@Anonymous wrote:

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http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secure-technique/m-p/4506756

Thanks again for the link. I will definitely read that whole thread. Just a brief skimming looks like there's a wealth of information in it!  

Just bear in mind that paying in full does not necessarily involve having a low utilization, which you should also be looking for. 

I realize this, which is why after I pay everything off I'm going to switch to the credit card with the highest credit limit for my cost of living expenses. Currently, that's not what I'm doing, but only because I'm attempting to pay as little interest as possible. Once everything is paid down then I'll switch which card I use. 

If you tell BBS or SouthJ what your credit limits are on all three cards (total credit limit) and your typical monthly CC spend, then they can let you know whether you are set or whether you need to take extra steps to keep your total util low.

Not sure if either are still paying attention to my comments (I didn't mean to hijack this thread). But one is a Citibank Mastercard, which has a $11,500 credit line (which currently has a $2800 balance at 12.15% APR). My other is a Discover Card, which has only a $3500 credit line (and a $3,300 balance at 0% APR for 12 months, which then goes to 23.24%). I have a Capital One business card (this is the one I'm currently using for expenses and paying off every month), which has anywhere from $1000 to $1300 balance that is paid in full each month. The credit line is only $2800 (it's tied to my business) and has a 23.15% APR. 

I also have a CareCredit, which is a dental line of credit with a zero balance and I want to say it's less than a $1000 credit line which I haven't used in forever, but it's still an open account. 

So I think I understand what my best strategy is at this point. To pay off the $2800 I'm paying interest on even though I realize it hurts me that the Discover card is almost at 100% utilization, which hurts my score. But I have a thing about paying interest on stuff I'm not even using anymore -lol. So that's #1 priority. Then I'm going to pay down the Discover even though it's a 0% interest to at least a $30 balance or so. Finally, I'll stop using Capital One altogether and start using my citibank for purchases, since even at $1000/mo utilization will never be much more than 10% on that card. Think that's my best strategy? 

Your best plan would be first to pay down your cards, wait for the new paid-off CC balances to appear on your credit reports, and then take out a $500 SS loan with Alliant, using the technique as described in the guidance.

I'll definitely research those techniques! I really appreciate the advice and sorry about hijacking this thread. You guys are great!

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If the Capital One Spark card is your only business card, and you have a business, then you should keep on using it. It's a great card anyway, unless you don't like a business card that reports on your personal credit.

Bear in mind that utilization is almost always based on the statement balance, so if you pay it off before the statement cut, it won't be an issue.

You should get that Discover card below $3150, I don't care whether you're paying zero interest or not. A maxed card is murder.

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So you're suggesting paying off the balance before the statement is cut? This might require several payments, but it makes sense. That way, there would be less of a balance reporting. I could even pay off as I use it or once a week or so. Excellent idea! 

As for the Discover, I know. I know. But how murderous can it be? It's just for a few months. So my score is 732 instead of 738 or so? What I really need is for that one medical baddie to fall off. I wonder if I could write a letter of consideration? Or that's probably not the right terminology. What is a letter where you ask they remove a negative remark called again? A good faith letter? 

Anyway, thanks again! I'll definitely start paying down the Cap card before the statement is cut from now on. 

[Anonymous]

You are referring to a "goodwill letter."  I agree that getting a baddie removed is probably the best thing you can do for your score, so I'm very big on writing GW letters.  Sometimes it may take writing a bunch to yield a favorable result, but IMO it's well worth it in the end.

Here's a thread I recommend to anyone that is considering starting a GW letter campaign:

http://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/The-Saturation-Technique-Best-GW-adjustment-o...