How would a share secured installment loan from my CU affect me?

[Anonymous]

Long time lurker, first time caller. So I keep reading how a mix of loans is accounted for 10% of the score. 

I currently have 4 credits cards:

1. 3y10m

2. 1y10m

3. 0y11m

4. 0y0m (new approval!!)

My TU Fico8 is 677 with 1 bankruptcy 03/2015 and 100% payments. 

This is literally my credit file, 4 TL, 2-3% utilization, 1 Chapter 7 and zero installment. I will be looking to get a car in a few years, so looking to build my credit for that to get as best as a rate as I can with a BK on file. Once my BK falls off, I will be looking for a mortgage. So I am really looking to build my credit score to get desireable rates. I was considering going to my credit union and getting a secured installment loan of about $1000 just to mix up my credit file. So just a few questions

1. I get that when I open the new loan, I’ll probably get a slight score increase, and when it is all paid off, I will likely see the score drop everyone sees when an installment loan closes. So, how much of a drop are we talking? Will I see a score drop below my current score which has no installment loan? So for example calculators are saying getting a new installment loan will increase my score by 3 points immediately. When I pay it off, will I see my score drop below my current 677?

2. What would happen if I open this loan, let it report for one month, then immediately pay it off? Since I am only looking to do $1000, was looking at a 12 month term. So if I just pay it off quickly just to get even a single closed installment account on my file, will that even give me any sort of bump or should I let it go for the 12 months?

I am honestly not looking to maximize my score to the greatest extent possible, I just want a decent file. So I’d really like to just open it, let it report, and pay it off if that will still benefit my “mix of accounts” check box. But if it is going to drop me below my current 677, what’s the point? Anything I am missing?

Thank you!

[SouthJamaica]

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@Anonymous wrote:

Long time lurker, first time caller. So I keep reading how a mix of loans is accounted for 10% of the score. 

I currently have 4 credits cards:

1. 3y10m

2. 1y10m

3. 0y11m

4. 0y0m (new approval!!)

My TU Fico8 is 677 with 1 bankruptcy 03/2015 and 100% payments. 

This is literally my credit file, 4 TL, 2-3% utilization, 1 Chapter 7 and zero installment. I will be looking to get a car in a few years, so looking to build my credit for that to get as best as a rate as I can with a BK on file. Once my BK falls off, I will be looking for a mortgage. So I am really looking to build my credit score to get desireable rates. I was considering going to my credit union and getting a secured installment loan of about $1000 just to mix up my credit file. So just a few questions

1. I get that when I open the new loan, I’ll probably get a slight score increase, and when it is all paid off, I will likely see the score drop everyone sees when an installment loan closes. So, how much of a drop are we talking? Will I see a score drop below my current score which has no installment loan? So for example calculators are saying getting a new installment loan will increase my score by 3 points immediately. When I pay it off, will I see my score drop below my current 677?

2. What would happen if I open this loan, let it report for one month, then immediately pay it off? Since I am only looking to do $1000, was looking at a 12 month term. So if I just pay it off quickly just to get even a single closed installment account on my file, will that even give me any sort of bump or should I let it go for the 12 months?

I am honestly not looking to maximize my score to the greatest extent possible, I just want a decent file. So I’d really like to just open it, let it report, and pay it off if that will still benefit my “mix of accounts” check box. But if it is going to drop me below my current 677, what’s the point? Anything I am missing?

Thank you!  

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You're operating under a lot of misconceptions.

Here's what you should be doing:

1. Not applying for any new credit. Period.

2. Pay your 4 cards in full each month, letting at least one  report a small balance before you pay it off.

Now, about your misconceptions:

- You would NOT get a score increase from taking out a loan

- The share secured installment loan maneuver will only help you if you can find a credit union that will not advance the payment dates when you partially prepay. NFCU is the only credit union we have found that fits the bill at this point.

-The SSL maneuver doesn't give you the increase until you pay the loan down to 9% or less of the original loan amount

-The SSL maneuver will have little or no effect on your mortgage scores; it will help some of the other scoring models.

-It's a bad idea to open the SSL and close it. You're resetting your age of youngest account and lowering your average age of accounts for nothing. No you will not gain from it, you will lose from it.

-You don't need an installment loan to have a good credit file. You can get an 850, or close to it, without ever having an installment loan.

[Anonymous]

Thank you! Definitely cleared some stuff up, but also in the mean time I just found this SSL maneuver being touted on here. I was unaware when I first made this post, I was just going to go get one because I knew when I worked at a credit union we would offer such products. But now I am very intrigued with this method you guys all talk about here. Is it a red flag to ask about if paying off advances payments? I know when I worked as a credit union CSR and would rarely originate an SSL, if I was asked that about such a product I would not have known that answer to that question anyways.  For an auto loan sure, but we so rarely saw these products actually being used! So I guess if they can answer that question maybe I’ll look into it, but if not then I won’t worry about it. I’m not going to be the market for an auto loan for about 2-3 years anyways. Which honestly I was just wanting to pay cash for but was looking into a loan to build installment history. But if this’s SSL maneuver would do the same thing essentially and the mix has no bearing on mortgage rates, then I guess I wonder what’s the point?

So maybe I’m back to square 1, and just pay cash for my car in a few years and let these current accounts age. Car 2-3 years and house in 6-7 years. Only got the new TL because I was a sucker for a titanium card... otherwise my plan was to just age 3.