Polishing credit

[Croselx]

Hi there I have a question regarding increasing credit score.

Backstory:

AAoA is 2.5 years

Have 10 reported inquiries, about 8 date back to 1 year and 3 months, the other 2 have 5-6 months.

I have 2 Credit Cards with overall util of 3%

Visa: 500 (1 30 day late payment about a year and a half ago)

Paypal SC: 800 (CLI increase due on december) always on time

I have 2 reported 'loan' types

Telephone bill (not sure how it got reported) %100 on time

$1k loan @ ridiculous interest: paid always on time.

My scores from creditkarma:

Vantage: 729

Transrisk: 704

My scores from credit.com:

Experian: 734

Estimated Fico: 719

I know the above are just estimates and aren't to be taken as real scores. I currently have no intention of paying to view my score. I ask my lenders which agency they use and what is the score when they soft pull (or hard pull) and then compare it to vantage and it is pretty close.

I owe 19 months on the $1k loan and will pay a total of $1265 if I go through the normal payment plan. Principal is about $890-$900. I can prepay without penalty and currently have the money to do so. I have also been offered a 'loan renewal' on the 8th month to lower interest rate. My end-goal is just to increase credit score and history.  I'm not sure of renewing as that may lower my AAoA (in case it is closing current and opening a new account), I definitely don't want to ride this out the whole 2 years as I would be paying too much interest (and I hate paying interest..). What do you all recommend here, keep account and open a few others or close account and open a few others? Important info: I'm in 'farming' mode and will remain this way until at least December or March (when my 30 day late will age to 2 years).

[Jutz]

Looks like you're doing a good job so far, keep it up.  As far as the question about whether to pay it off or not, it's probably going to get the best answers in Understanding Fico, or Rebuilding my Credit.  The basic question is, does an installment loan only help credit mix if it is currently open.  It will continue to help AAoA for 10 years after closed, but the credit mix I'm unsure of.

[webhopper]

---

a installment loan is great for building history...  I did a secured loan with Chase back in 2007, and it really helped me with rebuilding.  The interest rates on secured loans is rediculously low.  If you have the money to pay off the unsecured loan, I would pay it off at the 12 month mark if I were you.   After twelve months, if you still need an installment loan you can look at the secured loan option...  the great thing about secured loans is that at the end of the repayment period, you have a financial asset (usually a CD) 

[Jutz]

Does Chase still do secured loans?

[GregB]

You are doing fine.

Any similarity between your Vantage Score and any lender pulled score is almost certainly an accident. There are such a tiny number of lenders using Vantage that it is unlikely that you hit one. Vantage is WAY off, in general.

If I was in your situation, I would pay a substantial chunk of the installment loan off ASAP. Make sure that you have enough of a balance left that the loan has a total duration of more than one year. That will mean you will be paying the high interest rate but on a much smaller balance. When the lower balance shows, that will helpl insure the CLI due in December.  I agree with your concern about AAoA by renewing the loan.

The inquiries over one year don't count on FICO, which is what counts for most lenders.

[Croselx]

Thanks for the quick replies (and mod moving to the right place). My worry about paying only a part of the loan is in case the payment remains the same (as in same amount applied to interest and the rest as principal). Should I get a new loan note if I pay off 50-70% of the balance?

[GregB]

In any normal loan the interest is always charged against the remaining principal. The payment amount is always the same in most loans. So when you pay off extra principal, the interest will be less in each following payment and the principal will go up. An extra $100 paid in the beginning can take $200 off at the end if the interest is high enough and/or the term is long enough. An extra $100 paid at the beginning has a big effect. An extra $100 toward the end has little more than $100 reduction in total payments.

[jamie123]

Okay...I have a few questions so I can come back with a bit more accurate advice.

How soon are you looking to make a large purchase like an auto or house?

How old is the Visa with the $500 CL?

Who is the lender on the Visa?

How old is the Paypal SC?

Are you polishing your credit for a specific reason?

[Croselx]

How soon are you looking to make a large purchase like an auto or house?

Home - 2-3 years from now will be investment property.

How old is the Visa with the $500 CL?

3.5 years, it is a student visa serviced by a major bank in PR, has a starting limit of $300 and maximum of $500. Should I want a bigger limit = new card, hard pull, and most likely a low limit with hard pulls should I want CLI considering close relatives' experience with this bank.

Who is the lender on the Visa?

Major bank in PR.

How old is the Paypal SC?

About 1.5 years. Never requested CLI until summer and only requested $800 then because of a purchase I was going to make (probably could of gotten a little bit more).

Are you polishing your credit for a specific reason?

Looking forward to buy several investment properties and I want to get the lowest interest rate available/make myself attractive to the possible lender. Also want a card with cash back rewards and a nice limit so I can use it for my month-to-month expenses and rack up rewards.

EDIT: Thanks to GregB's explanation I have decided that I will just pay off a big chunk of the owed money and then pay off the rest in 5-6 months so the loan reaches the 1 year mark. This way I won't pay as much interest.

[jamie123]

You are doing great with what you have but your file is a bit thin. Since you have 2 years before making a purchase you have about 1 year to add some additional credit to thicken your file. You don't really want to add any credit for 1 year prior to applying for a mortgage.

With all that in mind, this would be my suggestion:

Apply for a Bank of America 1-2-3 Cash Rewards card. This is a really good cash back card and is not too difficult to be approved for. This is a prime bank and the CL will grow with you for life.

Apply for a Walmart card. They are really good with CLIs and you will get a free TU FICO score every month after you sign up for electronic bill pay. You should easily qualify for this card with your scores.

After you get these cards I would call your Major PR bank and ask for a CLI. All they can say is no, but I would at least try. You might want to get another card with this bank if they won't increase the CL on the card you have now. You need to get some cards now that will grow with you for life.

Don't get any other store cards besides the Walmart and the Paypal you have now.

Don't be concerned about the HPs right now. They will only affect your scores for 1 year and by getting a few more cards now your credit file will be much stronger in a year.

Keep us posted on what you decide and how it turns out.

Good luck!