Should I get an installment loan?

[bdhu2001]

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@Anonymous wrote:

+1 to eveything InperfectF just said, including timing.

Bear in mind that there are two different factors that this strategy will benefit.

(1)  CREDIT MIX: Having an open installment loan.

(2)  AMOUNTS OWED:  % of your total open installment loan that has been paid off.

With #1, you will benefit because you have never had an installment loan loan of any kind (open or closed).  With #2, you will get a lot of points for having open I-debt but having paid off most (but not all) of it.  Right now you get no FICO points for #2.

It's crucial to understand WHY a strategy works.  Otherwise, for example, the people who read this thread could think that all they have to do is use this trick and their score will go up.  It won't necessarily.  This strategy is designed to benefit people who have no open installment loans.  If someone already has one, this won't give them any help.

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I would buy the 3B report so that you'll know what you're mortgage scores are.  If you purchase the subscription, you'll have credit monitoring and access to the simulator. You can use it for a month or two and then cancel it until it's closer to the time that you'll need your loan.  On the other hand, you may find that your mortgage scores are better than your 08 scores and you'll simply need to keep your UtI down.  

Regardless, I would also get the shared loan right away so that it can age and help you. If you get the subscription, it will also advise you of how your score is affected by the shared loan and payments to the loan.

[CreditDunce]

My fault.  I read it as you didn't have any open installment loans.  If you don't have any installment loans, then it is absolutely the correct advice to get a shared installment loan.

I would be interested to see how it affects your mortgage FICO scores.  It isn't that common you see someone without either student or autoloan getting ready for a mortgage.

[Anonymous]

Hi Westriver!  We can help you a bit with the AAoA question, and whether the new SS loan account could affect your AAoA (from a scoring perspective).  There's no question that opening the SS loan will lower your AAoA, but the change might have zero impact on your score.

I encourage you to compute your AAoA for four different scenarios, all based on the same timepoint.  (For example, January 2016.)

Not counting the AU account:

(1)  Assuming you opened an SS loan on January 1, 2016.

(2)  Assuming you choose not to open an SS loan.

Counting the AU account:

(3)  Assuming you opened an SS loan on January 1, 2016.

(4)  Assuming you choose not to open an SS loan.

If you are willing to do that legwork, you'll be able to see what kind of impact those two variables have on your AAoA:

      Will I be counting my AU when I go through underwriting?

      Will I add an SS loan?

Since both questions are yes/no, that's why you end up with four possibie values for your AAoA.

Remember too that your AAoA will continue to go up every month during 2016 since your are not adding any more accounts after the SS loan.

The key point will be that FICO might give you a small score boost if your AAoA crosses a full integer value prior to underwriting.  For example, if it goes from 0.9 to 1.1.  But if your AAoA does not cross over into a new integer value, you will get zero score boost.  And the higher the integer, the less likely you will get a boost.  For example, 0.9 to 1.1 is significant, but 4.9 to 5.1 is probably not.

Finally, your reasoning -- that even if you take a small score hit due to a lower AAoA, it will be more than counterbalanced by the improvement to your mix -- strikes me as very sound.  (Remember too that the SS loan gives you a benefit to a factor in the Amounts Owed category as well.)

[Anonymous]

Just to clarify, I have a closed installment loan reporting on all my credit reports.

When I executed the shared secured loan strategy, there was a significant score increase. However I was in the 790 range before paying ahead on the secured loan. So results may vary depending on what your score currently is.

For best result, I would only get the secured loan if I had no active installment loans. Closed installment loans don't have the same effect.

[Anonymous]

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@bdhu2001 wrote:

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@Anonymous wrote:

+1 to eveything InperfectF just said, including timing.

Bear in mind that there are two different factors that this strategy will benefit.

(1)  CREDIT MIX: Having an open installment loan.

(2)  AMOUNTS OWED:  % of your total open installment loan that has been paid off.

With #1, you will benefit because you have never had an installment loan loan of any kind (open or closed).  With #2, you will get a lot of points for having open I-debt but having paid off most (but not all) of it.  Right now you get no FICO points for #2.

It's crucial to understand WHY a strategy works.  Otherwise, for example, the people who read this thread could think that all they have to do is use this trick and their score will go up.  It won't necessarily.  This strategy is designed to benefit people who have no open installment loans.  If someone already has one, this won't give them any help.

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I would buy the 3B report so that you'll know what you're mortgage scores are.  If you purchase the subscription, you'll have credit monitoring and access to the simulator. You can use it for a month or two and then cancel it until it's closer to the time that you'll need your loan.  On the other hand, you may find that your mortgage scores are better than your 08 scores and you'll simply need to keep your UtI down.  

Regardless, I would also get the shared loan right away so that it can age and help you. If you get the subscription, it will also advise you of how your score is affected by the shared loan and payments to the loan.

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I have purchased my 3B report.  I am subscribed and my last quarterly report I viewed in November - so I won't get to see my updated mortgage scores until Feb, since I'm not willing to put down $60 for an updated score just yet.  It's interesting watching my FICO 8s move all around (seemingly arbitrarily at times) but I'm hoping for some serious mortgage score changes since that's what I'm really interested in.  I've contemplated paying the $60 so I can see how my mortgage scores have been impacted by the removal of my student loans - but... $60 when I'm already paying the $30/mo is tough to swallow.

I think I've read on here that popular belief states the mortgage "trifecta" are more swayed by credit mix - as well as AAoA (eep) - that the FICO 8s?  It's tempting to pay the $60 to find out....

[Anonymous]

Not only do you not need to lay out $60 more for something you'll be seeing soon anyway, you'd ideally like to receive your quarterly report AFTER you have gotten the new changes made to your credit profile.  It sounds like you have decided to go with the idea of adding the SS loan.  In a perfect world, you'd like to see the loan appear on your reports and get the balance way down before you see your new mortgage scores.

On what day in February will your quarterly 3B report appear?  You may be able to get all that in place if it is not until mid-Fed.

[bdhu2001]

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@Anonymous wrote:

Not only do you not need to lay out $60 more for something you'll be seeing soon anyway, you'd ideally like to receive your quarterly report AFTER you have gotten the new changes made to your credit profile.  It sounds like you have decided to go with the idea of adding the SS loan.  In a perfect world, you'd like to see the loan appear on your reports and get the balance way down before you see your new mortgage scores.

On what day in February will your quarterly 3B report appear?  You may be able to get all that in place if it is not until mid-Fed.

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+1.  Don't pay again for something you already subscribe to & receive.

[Anonymous]

Okay! I donated my $$ and joined Alliant. Opened a savings account and I am waiting for the account verification deposits into my usual checking so I can transfer the funds over. While I was at it, I opened a high rate checking account. Since their product seems quite decent, I might actually USE Alliant and found a code for $80 (CHEK9 - good thru 12/31/15). Then my "loan" can just be deposited into the new checking account - right?

Tomorrow I'll be able to verify the deposits and tranfer the money into the savings account. Any ideas how long after that until I can ask for the loan? I might call their CS to see if I can just get it done.

On a side note, my husband doesn't seem very happy about this. He's "old school" in that, until last year, he had 1 credit card with his credit union (5k limit foooorever that I just encouraged him to ask for an increase on - which he got to the 10k he asked for), 1 Macy's card and doesn't hardly use either. He's a cash guy. Although it's worked for him - two cars paid off, scores in the low 800s. He's coming around to the idea of using ccs for cashback/points/purchase protection but all this score optimizing is annoying to him. (I can see how it would be since he doesn't need to "optimize" his already optimal score.)

[Anonymous]

Oh! And my next 3B will be avail on 2/7/16. But I think I can pull it later - that's just the soonest it will be available, right?

[Imperfectfuture]

Yes, you can pull later.