Increasing FICO scores by 20 points through a Secured Loan

[seattlecredit08]

As I understand, what others have reported is that generally they have seen about a 20 point increase in their FICO scores after doing the secure installment loan "hack." (this "hack" involves opening a Savings account and then obtaining a secured loan against this account and paying off most of it immedetiely, thus getting a low utilization installment loan reporting to CRAs; the "hack" works because it makes the consumer's profile more diverse).

My question is as follows--- while I am still working hard on my Experian and TransUnion reports, my Equifax is already completely clean and has a relatively high score already. 

My Equifax looks likes this:

FICO 8 score: 770

2 credit cards opened

2 AU credit cards opened

No other open accounts, no installment loans

No inquiries

Several closed accounts but not many

Average Age of Accounts is about 12 yrs

Question: For a profile like this, will the Secured Installment Loan Hack work to boost my Equifax FICO? E.g. will it increase from 770 to let's say 790?

I am pretty sure it will help my Experian and TransUnion, which are very low (my TransUnion is not even 600) but I also don't want my Equifax to go down.

Thank you!!

[Anonymous]

The typical boost is 25-35 points.  Yes you will get that, assuming we are talking about FICO 8 and not the mortgage models.

We have had people go from a FICO 8 of 818 to 850 -- so the fact that your score is already high should not restrict your ability to go up.

Do you have any closed installment accounts?  If so, the technique may benefit you a bit less (e.g. 25 points vs. 35) than if you had no installment accounts of any kind, closed or open.

[Anonymous]

Be sure that you pay the balance down to less than 8.9% of the original loan amount.

Also, the bureaus where you have a very dirty profile may have a slighly smaller benefit, since they are in different scorecards from the clean one. 

Bear in mind too that if the lender pulls one of your dirty reports, he might get nervous about granting the loan, depending on how serious the bad past history was.  Probably will not, since the loan is secured, but it is conceivable -- otherwise I can't imagine why they'd do the pull at all.

Which lender are you using?

[seattlecredit08]

Does it make a difference that I have 0 inquiries and all of a sudden I will get 1 new inquiry in the process of getting an installment loan?

Otherwise, I am thinking of joining PenFed for this. Any disadvantages of using PenFed for the share secured loan?

So far, what I have gathered about PenFed:

1. One Hard Paull (Equifax) for joining and all products, including share secured loan

2.  Share secured loan can go up 60 or even longer

3. Allows to pre-pay WITHOUT shorterning the loan term (???)

Is this correct?

Thanks!!

[Anonymous]

An inquiry costs at most 5 points or so.  Sometimes it costs nothing (that can be true for more than one reason).

The SSL technique gives you 25-35 points.  So worst case scenario, you'll get 20-30 points on the bureau with the inquiry, 25-35 with the other bureaus.

I do not know anything about PenFed.

[manyquestions]

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@seattlecredit08 wrote:

Does it make a difference that I have 0 inquiries and all of a sudden I will get 1 new inquiry in the process of getting an installment loan?

Otherwise, I am thinking of joining PenFed for this. Any disadvantages of using PenFed for the share secured loan?

So far, what I have gathered about PenFed:

1. One Hard Paull (Equifax) for joining and all products, including share secured loan

2.  Share secured loan can go up 60 or even longer

3. Allows to pre-pay WITHOUT shorterning the loan term (???)

Is this correct?

Thanks!!

---

For Penfed, there is a minimum monthly payment of $25 listed in the other thread.  Call them and ask them if that is true.  The problem would be that a mandatory minimum payment each month would force you to pay off the loan soon after you paid it down to 8.9%.

[seattlecredit08]

For Penfed, there is a minimum monthly payment of $25 listed in the other thread.  Call them and ask them if that is true.  The problem would be that a mandatory minimum payment each month would force you to pay off the loan soon after you paid it down to 8.9%.

Thanks! So then, if one wanted to keep the benefit of the score increase for 1 or 2 year,s they would have to take on the loan in the amount:

12 Month Benefit: 12 X $25 = $300  ===>  X (100% / 8.9%) = Minimum $3,371.00 original loan to take

24 Month Benefit: Minimum $6,742 original loan to take

This is certainly much less convenient than Alliant.

Other than that, are there any issues with PenFed as an option?

Thanks!!

[manyquestions]

I haven't done the loan with Penfed.  But I believe what you described is correct. I'd call them and ask for more info about any minimum payment.  Most of the info here about other institutions other than Alliant is from a couple years ago and things change. They might not have a minimum payment any more. Or maybe that "minimum payment" refers to the initial amount of the loan compared to the allowed length of the loan. Maybe all it means is that the initial amount of a 60 month loan needs to be 60x25=1500.  Ask them about that sort of thing.  Ask about how the loan behaves if you pre-pay it a year or two or three.  Do you still need to make monthly payments each month if the loan is prepaid two years in advance?  I'd find Creditguy's list of desired features and then call the loan department and calmly ask them how their loan works under different scenarios involving prepaying various amounts.

[Anonymous]

Is it true this hack is only beneficial if you don't already have a mortgage? And will it do anything for your auto enhanced score?

[Anonymous]

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@Anonymous wrote:

Is it true this hack is only beneficial if you don't already have a mortgage? And will it do anything for your auto enhanced score?

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You can find out about the Share Secure Loan technique by reading here (just the first two posts):

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

As you will see, the issue is not whether or not a person has a mortgage, but whether they have an open loan of any kind.  The SSL technique is only of benefit to people with no open loan.

And yes, as far as we can tell the SSL technique helps all FICO 8 and FICO 9 models, including the Auto Enhanced flavors of them.  If a lender is using a model that predates FICO 8 (which would be a very old one) then the SSL technique might not help at all.