Should I get an installment loan?

[olehammer]

I'm waiting for my Alliant loan to report first before I pay it down. I paid $20 out of the gate. I want to make sure the $500 starting balance and $480 remaining both report before I agressively pay down.

[Anonymous]

Hey WestRiver!  Glad to see all this is working out for you.

It probably doesn't matter whether you do it now or wait.  The whole reason you are doing this, however, is to prepare for an upcoming home purchase, if I am remembering right, and you wanted (ideally) to get all your account balances (whether the SS loan or credit cards or whatever) in perfect shape by mid-March. 

So it probably makes sense to wait just a couple more business days and then pay it down.  But be sure to do whatever anyone with hard experience says -- I have never used the SS loan technique myself.  (Edit: I just saw Olehammer's response.  If you are willing to wait a little more, OH may know best.)

The one piece of advice I'd give is to lower your Amount Owed to a little lower than 10%.  Nobody knows for sure where that breakpoint is.  What people do know is that FICO rounds "percents" up to to the next whole number.  Therefore my personal suggestion is to pay down the loan to LESS than 8.99%.  That way, if the sweet spot is an installment utilization of 1-9%, you will be set. 

Reminder to any new reader who is jumping to the end of this thread:

*  This technique (getting an SS loan to help your score) only really works for people who have no open installment loans currently.  If you already have open installment debt (car loan, student loan, personal loan, mortgage, etc.) you will get no benefit from it.  There are places earlier in the thread where it is explained why this is the case.

[StartingOver10]

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@Anonymous wrote:
Thanks Slim! I hope so too. The funds were transferred into the checking account. Now I'm undecided whether I should make a large payment to take the loan to under 10%, or if I should wait until the account posts to the CRAs and then pay?

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Wait to pay until the full loan reports to the CRAs.  Once it reports, then make your large payment to make sure the balance is less than 9%.  The whole beauty of doing it this way is the installment utilization is easy to achieve.  First it shows a new account installment balance of $500, then after it reports you pay $455 leaving a balance of $45 to pay for the rest of the length of the loan. The account must first show the full loan amount to get the benefit of the large percentage paydown for your points.

The calculation is based on the remaining balance against the iniital balance.

[Anonymous]

See?  I knew there would be somebody here who would know the answer.  Thanks StartingOver!

[Anonymous]

I don't know if you can pay it all at once with a lump sum...

What I did, was pay each monly payment over and over till I was at a $45 balance. The inferace (Transfers section) shows all those future monthly payments made, your avialable balance, and date of your next payment. My next payment ended up being Dec2019.

[StartingOver10]

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@Anonymous wrote:

I don't know if you can pay it all at once with a lump sum...

What I did, was pay each monly payment over and over till I was at a $45 balance. The inferace (Transfers section) shows all those future monthly payments made, your avialable balance, and date of your next payment. My next payment ended up being Dec2019.

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You are right slimshady66 ^^ I wasn't clear in my post. The monthly payments ahead is what makes it work and not one lump sum.

[CreditMagic7]

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@Anonymous wrote:

I don't know if you can pay it all at once with a lump sum...

What I did, was pay each monly payment over and over till I was at a $45 balance. The inferace (Transfers section) shows all those future monthly payments made, your avialable balance, and date of your next payment. My next payment ended up being Dec2019.

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Curiosity Q just to lay it out in layman's terms.

Since that next payment now is accelerated ahead to that Dec 019 date exactly how often do you (or should you) make with occasional payments (if at all) during the interim.

[Anonymous]

I had the same question.  I had always heard the recomendation (from Revelate and others) that you needed to make a very small payment (2-3 dollars) every once in a while to keep the account active.  But whether that was every 11 months, 8 months, 4 months, etc. I wasn't clear on.

[olehammer]

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@CreditMagic7 wrote:

Curiosity Q just to lay it out in layman's terms.

Since that next payment now is accelerated ahead to that Dec 019 date exactly how often do you (or should you) make with occasional payments (if at all) during the interim.

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My plan is to make a $1 payment every other month after paying down to $45.  I'm also planning to pay down to 79%, 59%, 39% and 19% in successive months and letting those levels report. I'm curious to track the impact on my scores and I'm not in need of an optimal score until August.   

I only need the loan until June 2017 when we plan to close on a home. Want to make sure I don't get stuck paying it off too quickly to keep it "active". 

[CreditMagic7]

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@olehammer wrote:

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@CreditMagic7 wrote:

Curiosity Q just to lay it out in layman's terms.

Since that next payment now is accelerated ahead to that Dec 019 date exactly how often do you (or should you) make with occasional payments (if at all) during the interim.

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My plan is to make a $1 payment every other month after paying down to $45.  I'm also planning to pay down to 79%, 59%, 39% and 19% in successive months and letting those levels report. I'm curious to track the impact on my scores and I'm not in need of an optimal score until August.   

I only need the loan until June 2017 when we plan to close on a home. Want to make sure I don't get stuck paying it off too quickly to keep it "active". 

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I like your style. It will make for another interesting study maybe, dunno, but i follow what you're laying out in that fashion. My new SSL was approved today and so the journey begins afresh for me on a couple of fronts. First is that a current IL is almost to term and ends in March or April and this one should begin in earnest (according to Alliant) in March. My score oddly enough only lost a single point (-1) when the auto loan matured last month. I really was expecting a slightly different ding but definitely can't complain over a single point of a long term IL falling off.

This new one is to serve as something of a buffer against the (No Installment Loan) penalty FICO normally assigns.