Installment tradeline utilization thread

[Anonymous]

Yes last day of the month, always.

[JBjunior]

I am going to see if this will get me above 800 and I will possibly be looking at a mortgage later this year.  My two issues are lack of installment loan and AAoA, so obviously this will help one and hurt the other.  So I opened my account today and I am working on getting it funded.  I have the courtesy $5 in there, how much money do I want to put in exactly for the $500 loan?  I don't carry debt of any kind as a general principle, what is the max that I can pay to get the most points and have the loan report for the duration?

[manyquestions]

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@JBjunior wrote:

I am going to see if this will get me above 800 and I will possibly be looking at a mortgage later this year.  My two issues are lack of installment loan and AAoA, so obviously this will help one and hurt the other.  So I opened my account today and I am working on getting it funded.  I have the courtesy $5 in there, how much money do I want to put in exactly for the $500 loan?  I don't carry debt of any kind as a general principle, what is the max that I can pay to get the most points and have the loan report for the duration?

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I'd do what slimshady suggested on the previous page: http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Installment-tradeline-utilization-thread/...

Here is CreditGuyinDixies version: http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Should-I-get-an-installment-loan/m-p/4430...

[JBjunior]

Thanks, I think I will pay it down earlier, from reading through it still reports the total amount regardless.  So do i only have to deposit exactly $500 for the loan or is there a reason to put in more?

For anyone that would like to give an educated guess, would the hit on the AAofA, currently at around 6 years, be outweighed by the addition of this installment loan?

[Anonymous]

The answer is, only you can know.

If you have 20 tradelines with 6yr AAoA, then adding a new tradeline with reduce your AAoA about .5yr to 5.5yr AAoA

If you have ten tradelines with 6yr AAoA, then adding a new tradeline with reduce your AAoA about 1yr to 5yr AAoA. 

If you have five tradelines with a 6yr AAoA, adding a new tradeline with reduce your AAoA about 2yrs to 4yr AAoA

So it just depends on the makeup of your credit report.

The cost of the loan in my case was -9 points. The total increase was around 30 points when loan is below 10% UTI ($45 balance), for a difference of +21 points.

Before my Shared Secured load I was at around 7.7yr AAoA with 8 total tradelines, after the new tradeline reported went to 6.5yr AAoA. Still experienced 21 point increase accross the board once the loan reported less than 10% UTI (balance of $45).

There is a benefit to having an active installment loan with low balance. IMO it would be a good tactic for you assuming no baddies on your CR, maybe even if you do have baddies. On the intial deposit, recommend $525 or so, so you can pay the first couple payments forward.

On another note, Alliant has a decent APR on savings, at least compared with most major banks, so it wouldn't hurt to have savings there.

[BallBounces]

I assume that this utilization method is not terribly effective if:

You have 4 or 5 closed paid  installments still on record

and

You already have one current large installment with high UTI (no opportunity to change this one)  

Said another way, installments are not like revolvers where by adding one or more in "under 10" status helps overall utility and therefore score?

[manyquestions]

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@BallBounces wrote:

I assume that this utilization method is not terribly effective if:

You have 4 or 5 closed paid  installments still on record

and

You already have one current large installment with high UTI (no opportunity to change this one)  

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 From reading some of the reported results up-thread, you are correct, you would likely not benefit and may actually lower your score due to a lowered AAoA without a significantly lowered aggregate installment loan utilization if you already have a large open installment loan with high utilization.  What would help you is paying down the utilization on the loan you already have.

From looking at the reported results in this thread, aggregate installment utilization appears to be what is important.  I guess since Alliant secured loans go up to $500,000 if you could get a secured loan that dwarfs your current large installment loan and then pay down the $500,000 secured loan so that your total aggregate utilization between the two loans is below 10% then I think you might benefit.  I don't know if anyone has tried that last part to see if it would really work though.

[jamie123]

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@JBjunior wrote:

Thanks, I think I will pay it down earlier, from reading through it still reports the total amount regardless.  So do i only have to deposit exactly $500 for the loan or is there a reason to put in more?

For anyone that would like to give an educated guess, would the hit on the AAofA, currently at around 6 years, be outweighed by the addition of this installment loan?

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You really need to deposit a bit more to make sure you have the loan interest taken care of. I think the total loan interest on a 4 year loan is something like $27. Not per year, but total. I always recommend that people deposit $550 so when the loan is paid off and closed you will have about $23 in the account.

[JBjunior]

Thanks Jamie. I deposited enough, I will be transferring some back at some point in the future.  Without reading through the thread, if the loan was approved and is in their system today, how long has it been taking for it to show up on a report?

Also, where is the option to make a payment? I see the pay it off option, but not an option to make a payment.

[manyquestions]

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@JBjunior wrote:

... how long has it been taking for it to show up on a report?

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I think they usually report  the last day of the month. It might be in a few days for you or about a month from now.