Adding an installment loan -- the Share Secure technique

[Anonymous]

I got the savings account with Alliant, and next month I want to do the secured loan. Would it be any problem to do it with a sum like 5k or even 10K? 500 bucks will look odd, like I need smaller sum like that. 

Even if I put in 10K, and then pay off 91% immediately, I get the same effects, right? And I can use that 9100 from my savings account right after?

[Anonymous]

The FICO scoring results are the same if it's $500 or $10k.  People just use $500 because it's easier.  If you want to use a greater amount you can, but in the grand scheme of things I don't think it will matter.  It 100% won't matter with respect to scoring, and I'd say 99% wouldn't matter in terms of a manual review of your account... maybe that 1% out there would see value in a larger original balance loan, but IMO it really wouldn't matter.

[Anonymous]

I see. I'm no expert, but intuively it feels smarter to make it at least 5K or so. I will be trying this next month, most likely. I have not a single installment loan, open or closed, so it should add some points (I am at 700+)

[newhis]

I was thinking about the same, but for DriverMacGyver.

DriverMacGyver has a 12 month secured loan of $500 and paid $250 or so, from what I understand the loan will not be for 12 months anymore but for 6 (not the same rules as Alliant). So if he gets an Alliant loan for 5,000 and pay it down so the overall debt on both is only 8% instead of opening it with $500 and have an overall debt of 29% (50% on one and 8% on the other). He will have the most points now without the need to pay off the original loan.

I don't know if this will work.

[SouthJamaica]

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@Anonymous wrote:

I got the savings account with Alliant, and next month I want to do the secured loan. Would it be any problem to do it with a sum like 5k or even 10K? 500 bucks will look odd, like I need smaller sum like that. 

Even if I put in 10K, and then pay off 91% immediately, I get the same effects, right? And I can use that 9100 from my savings account right after?

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Yes. And yes.

[Anonymous]

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@newhis wrote:

I was thinking about the same, but for DriverMacGyver.

DriverMacGyver has a 12 month secured loan of $500 and paid $250 or so, from what I understand the loan will not be for 12 months anymore but for 6 (not the same rules as Alliant). So if he gets an Alliant loan for 5,000 and pay it down so the overall debt on both is only 8% instead of opening it with $500 and have an overall debt of 29% (50% on one and 8% on the other). He will have the most points now without the need to pay off the original loan.

I don't know if this will work.

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I see where you're going with this. I need a lot of help with theory but I can math!

A $5000 Alliant loan at 8% UTIL ($400) plus a $500 CU loan at 50% UTIL ($250) comes to 11.8% UTIL overall for installments if I did this, lets say, tomorrow. Payments are $42. In 6 months, my CU loan would be within a few dollars of paid (accounting for interest), but not completely paid off unless my last payment is larger(?). Total UTIL would be 7.3%. I would see maximum point benefit(<8.9%) at month 4.

A $500 Alliant loan at 8% UTIL ($40) plus a $500 CU loan at 50% UTIL ($250) comes to 29% UTIL overall if I did this tomorrow. In 6 months, my CU loan would be within a few dollars of paid. Total UTIL would be 4.5%. I would see maximum point benefit(<8.9%) at month 5 here.

If I paid off the CU loan completely at any point prior to 6 months or I didn't pull for mortgage until 7 months or more from now, I'd lose the benefit of the $500 going toward utilization but it wouldn't matter at all because the Alliant loan would be in-check at 8%. I think I'm in good shape no matter what I do here.

[Anonymous]

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@Anonymous wrote:

I got the savings account with Alliant, and next month I want to do the secured loan. Would it be any problem to do it with a sum like 5k or even 10K? 500 bucks will look odd, like I need smaller sum like that. 

Even if I put in 10K, and then pay off 91% immediately, I get the same effects, right? And I can use that 9100 from my savings account right after?

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As the other folks have indicated, there's no problem with opening an SS loan for a larger amount ($2000 vs. $500) as long as you apply the same technique of paying nearly all of it off early on.

But there's no FICO scoring advantage either.  You mention that $500 will "look odd."  It won't look odd to the FICO algorithm.  But you may feel that it might look odd to a live human doing a manual review of your credit report.  I think that is also very improbable.  I am trying to imagine a mortgage underwriter (for example) who would throw up a big red flag over a small loan but would regard a $10,000 loan as no problem, but I am having real diffiiculty.  If anything, a person who needs to take personal loans for large amounts might be a tiny bit more of a concern to the underwriter than the guy who wanted a small loan.  But either scenario is really unlikely I think.

Still, bottom line is that you should feel free to open a loan with $1k or 2k or 5k (etc.) if that makes you feel better.  Fellings and comfort are important.

Incidentally, a number of people on this thread have in the last few days mentioned paying a personal loan down to exactly a certain percentage.  For example, $45 out of $500 (which would be 9.000%) or $910 out of $10,000 (also 9.000%).  My advice is to always come in a bit under whatever percentage one is aiming for, since FICO rounds perentages up.  Thus my personal feeling is that if you are gonna pay a loan down to $45, why not get a tiny bit under that just for safety.  Same thing for CC balances (this is especially important with CCs, where a few extra pennies of interest or an extra cup of coffee can sneak in there and then indvertently cause your utilization to go up an extra percentage point).

[Anonymous]

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@Anonymous wrote:

I see. I'm no expert, but intuively it feels smarter to make it at least 5K or so. I will be trying this next month, most likely. I have not a single installment loan, open or closed, so it should add some points (I am at 700+)

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If that means you are in the low 700s, then I am confident that you will get at least 30 points.  The only exception might be if you are in a very limited scorecard. Scorecards are an advanced topic, but they are a way FICO has of imposing a ceiling on certain groups of people. 

If you have some significant derogs, or if your oldest account is still very young, or if you have very few accounts, you might be in a scorecard with a ceiling that could interfere with getting the full 30-35 points. 

[Anonymous]

Another thing I have seen mentioned in the last several days is that, because of the possibility that FICO might score mortgage debt differently in a few respects from an SS loan, therefore a person with a mortgage will get a strong benefit from an SS loan.

There is strong evidence that this is NOT the case.  We have had at least one person who did the following:

    * Had no open installment loans Iincluding mortgages).  Did have one or more closed loans

    * Added a $500 SS loan (paid down to $44) and promptly got 30-ish points.

    * Added a 200k mortgage several months later and promptly lost almost the exact same number of points he had gained with the SS loan.

The discussion elsewhere in the Forum around the ways that mortgage debt might be score differently suggests that a person may well achieve maximum paydown relief in a mortgage far earlier than with an SS loan.  Thus he might get his full 30-35 points by paying a mortgage down (if that is all he has) to 69% rather having to go all the way to 9%.  Even that is conjectural.  But if true it doesn't change the fact that early in the life of a mortgage, that huge debt will be keeping your total installment util quite high.

It's therefore important not to promise or even suggest to people who have or will soon have a mortgage that they will benefit from the SS loan technique.

That said, I remain very interested in anyone who has a mortgage (at 95% or more) and no other installment loans (closed or open) executing the SSL technique just to confirm that the technique does not work for these people.  If someone is willing to take a swing for the sake of science I think that is wonderful -- the more people we get replicating previous results, the better.  I just am careful to let them know in advanace that they are doing it for science and not for a hoped for score increase.

[Anonymous]

The simulator shows I will lose points.. but thats because its aithout the pay off...I hope.

I have 733-755 right now. Oldest CC is 5 yrs old. 4 new ccs from recent app spree