Installment loan to boost credit score.

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Uncle Pennybags
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Installment loan to boost credit score.

Post by Uncle Pennybags »

I'm told my lack of ever having an installment loan is hurting my credit score. What would be an easy and quick way to take out an installment loan without getting involved buying over priced Fingerhut items?
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whodidntante
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Re: Installment loan to boost credit score.

Post by whodidntante »

An inexpensive route would be a car loan. As long as you don't go buy a car to get it. An unsecured loan will typically cost more.
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Phineas J. Whoopee
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Re: Installment loan to boost credit score.

Post by Phineas J. Whoopee »

Uncle Pennybags wrote:I'm told my lack of ever having an installment loan is hurting my credit score. What would be an easy and quick way to take out an installment loan without getting involved buying over priced Fingerhut items?
The first question is whether your present credit score is hurting you in any practical way by being too low.

Companies which tell you one of your multitude of FICO scores are required to tell you what keeps it from being higher. They don't get to not tell you. In my case lack of a recent installment loan is listed as a factor, but my score is high enough that boosting it by borrowing money and paying installments with interest would make zero practical difference in my finances or my life.

If your credit score is low or average, there probably are other factors hurting you more. If it's toward the top of the range, the installment loan, taken only for FICO purposes, won't help you.

Is your score too low?

PJW
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Doom&Gloom
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Re: Installment loan to boost credit score.

Post by Doom&Gloom »

Phineas J. Whoopee wrote:
Uncle Pennybags wrote:I'm told my lack of ever having an installment loan is hurting my credit score. What would be an easy and quick way to take out an installment loan without getting involved buying over priced Fingerhut items?
The first question is whether your present credit score is hurting you in any practical way by being too low.

Companies which tell you one of your multitude of FICO scores are required to tell you what keeps it from being higher. They don't get to not tell you. In my case lack of a recent installment loan is listed as a factor, but my score is high enough that boosting it by borrowing money and paying installments with interest would make zero practical difference in my finances or my life.

If your credit score is low or average, there probably are other factors hurting you more. If it's toward the top of the range, the installment loan, taken only for FICO purposes, won't help you.

Is your score too low?

PJW
+1

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weedf16
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Re: Installment loan to boost credit score.

Post by weedf16 »

I don't understand the thought process that "I have to take on debt to improve my credit score". Credit score only matters if you are looking to borrow money. My philosophy is don't pay interest....earn it. If you can't afford to buy something with cash, then you can't afford it. The only acception being a house. Just my two cents.

Good luck!
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Uncle Pennybags
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Re: Installment loan to boost credit score.

Post by Uncle Pennybags »

Credit scores are being used for much more than issuing credit. They are used by insurance saleswomen, employers and landlords. They are used in ways we don't about so keeping it as high as possible won't hurt. My score falls to 800 whenever I use my credit card for a big purchase even if I pay it in full when due. I don't want my FICO 8 Bankcard Score to fall below 800.

The only thing I can do to improve my score would be to take out a closed end/installment loan. I'm looking for something short and sweet, borrow $1,000.00 for 6 months and be done with it. My credit union offers that but they are a bit of a bother.
enki
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Re: Installment loan to boost credit score.

Post by enki »

The way I see it, responsible credit usage is an easy way to see a quick 1% minimum return on spending, going up to as much as 5% depending on circumstances. This is even more profitable if you buy a lot of reimbursable work related products/services/etc. You don't need to go into debt to build up a good credit profile -- quite the opposite. Outside of installment loans (e.g. mortgage), we carry zero revolving debt across a dozen credit cards as we pay them in full every month. But we also net a few thousand dollars per year from that.

As Uncle Pennybags pointed out, good credit equates to much more than just being able to qualify for the best rates, etc. For better or worse, it is used for many other purposes. Granted most of the other uses are simply on the lookout for bad a credit history as opposed to caring whether you have an 800+ score.

It takes time and patience to build up a good credit profile. Also, don't get too worried about the upper echelon of credit tiers. It gets exponentially harder to raise your score as it goes up, but there is also basically no difference between having say a 740 vs an 820, as long as your credit report is free from delinquencies and other serious negative results. At that point, things such as debt-to-credit utilization, overall credit limits, length of history and income in general is much more important to creditors.
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dm200
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Re: Installment loan to boost credit score.

Post by dm200 »

Uncle Pennybags wrote:Credit scores are being used for much more than issuing credit. They are used by insurance saleswomen, employers and landlords. They are used in ways we don't about so keeping it as high as possible won't hurt. My score falls to 800 whenever I use my credit card for a big purchase even if I pay it in full when due. I don't want my FICO 8 Bankcard Score to fall below 800.

The only thing I can do to improve my score would be to take out a closed end/installment loan. I'm looking for something short and sweet, borrow $1,000.00 for 6 months and be done with it. My credit union offers that but they are a bit of a bother.
One of the least expensive ways to establish an installment loan on your record is a "share secured" loan from a credit union. You pledge (and freeze) your savings (up to the current balance on the loan) against the loan and get a very low interest rate.
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snowshoes
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Re: Installment loan to boost credit score.

Post by snowshoes »

My limited understanding of fico scores suggest 750-800 is top tiered scoring, I see no reason to play their game if your already scoring above average. Good luck!
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dm200
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Re: Installment loan to boost credit score.

Post by dm200 »

snowshoes wrote:My limited understanding of fico scores suggest 750-800 is top tiered scoring, I see no reason to play their game if your already scoring above average. Good luck!
I think it is best to be above just "average", if at all possible.
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Re: Installment loan to boost credit score.

Post by Herekittykitty »

whodidntante wrote:An inexpensive route would be a car loan. As long as you don't go buy a car to get it. An unsecured loan will typically cost more.
How do you do that? (A car loan without buying a car to get it.)
I don't know anything.
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Re: Installment loan to boost credit score.

Post by grabiner »

Uncle Pennybags wrote:Credit scores are being used for much more than issuing credit. They are used by insurance saleswomen, employers and landlords.
Landlords and employers use credit reports, but not scores. Your score is an estimate of the probability that you would default on a new loan. This is not what your employer cares about. If your only credit is a single credit card which you always pay in full on time, your potential employer does not care that this gives you a low credit score. Conversely, an employer or landlord may reject you if you can't satisfactorily explain why you have a six-year-old collection on your credit report, even though a collection that old doesn't affect your score very much.

Insurance companies do use scores to set your rate in some states, but they use a different score which estimates the probability you will file a claim based on your insurance record. These scoring models vary, but many are quite sensitive to inquiries; opening a new loan could hurt your insurance score for two years.
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Re: Installment loan to boost credit score.

Post by Geologist »

Uncle Pennybags wrote:Credit scores are being used for much more than issuing credit. They are used by insurance saleswomen, employers and landlords. They are used in ways we don't about so keeping it as high as possible won't hurt. My score falls to 800 whenever I use my credit card for a big purchase even if I pay it in full when due. I don't want my FICO 8 Bankcard Score to fall below 800.

The only thing I can do to improve my score would be to take out a closed end/installment loan. I'm looking for something short and sweet, borrow $1,000.00 for 6 months and be done with it. My credit union offers that but they are a bit of a bother.
Of course, different credit scores have different maxima, but in general if you have a credit score close to or above 800, it is very high. Yes, your score will fluctuate as minor credit usages occur, but it doesn't mean anything (and certainly doesn't enter the range that worries insurance companies). Since they have to give a reason why you don't have a maximum score, then they told you about installment loans. I would bet that getting one would not increase your score, however, because it is so high.

In short, you are worried over nothing.
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dm200
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Re: Installment loan to boost credit score.

Post by dm200 »

Herekittykitty wrote:
whodidntante wrote:An inexpensive route would be a car loan. As long as you don't go buy a car to get it. An unsecured loan will typically cost more.
How do you do that? (A car loan without buying a car to get it.)
IF you own a vehicle free and clear and the model year of the vehicle is recent enough (standards vary), most credit unions will make a "car loan" with the title pledged on the loan.
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Uncle Pennybags
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Re: Installment loan to boost credit score.

Post by Uncle Pennybags »

grabiner wrote:Landlords and employers use credit reports, but not scores.
It's the unknown unknowns of who uses what. It's scary how much "they" know about one just by what comes up on their WATS ANI.
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Re: Installment loan to boost credit score.

Post by mortfree »

If you fall to 800 I think you're in good shape

More important things to do with your time and money.
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Uncle Pennybags
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Re: Installment loan to boost credit score.

Post by Uncle Pennybags »

More important things to do with your time and money.
I'm retired and inquiring minds want to know. I was approved for a $1,000.00 loan for 6 months from my credit union. A loan officer will be contacting me. :greedy

Question; does the loan have to be open to increase my score or will there be a lasting effect?
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Re: Installment loan to boost credit score.

Post by guitarguy »

Uncle Pennybags wrote:
More important things to do with your time and money.
I'm retired and inquiring minds want to know. I was approved for a $1,000.00 loan for 6 months from my credit union. A loan officer will be contacting me. :greedy

Question; does the loan have to be open to increase my score or will there be a lasting effect?
I once read that the best way to do this, if you really need to, is to get a personal loan that allows pre-payment, pay it all back except $20 or whatever, then make very small payments to keep the loan open for the duration. It costs basically nothing and satisfies the "I don't have any installment loans" criteria to help your score.

Depending on how high your score is, and the *reason* why it is where it is, this may help or it may be a total waste of time and a few bucks.
orca91
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Re: Installment loan to boost credit score.

Post by orca91 »

Do you really think your credit score dropping to 790 compared to an 810 or whatever is going to change your life or finances significantly? I would have to doubt it.

I guess the good thing is the $1000 installment loan is like nothing to you and not a worry or any stress to your finances. I guess the bad thing is also the $1000 loan is like nothing to you and not likely to do anything to your finances. :happy

Hey, if it keeps you above 800, go for it. Personally, I wouldn't care or worry about it.
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Re: Installment loan to boost credit score.

Post by MathWizard »

Uncle Pennybags wrote:Credit scores are being used for much more than issuing credit. They are used by insurance saleswomen, employers and landlords. They are used in ways we don't about so keeping it as high as possible won't hurt. My score falls to 800 whenever I use my credit card for a big purchase even if I pay it in full when due. I don't want my FICO 8 Bankcard Score to fall below 800.

The only thing I can do to improve my score would be to take out a closed end/installment loan. I'm looking for something short and sweet, borrow $1,000.00 for 6 months and be done with it. My credit union offers that but they are a bit of a bother.
What is probably hitting the Credit Score is credit utilization.

I think below 10% of what the total of all your credit maximums would allow does not hurt your score.
It sounds like your "big purchases" push you beyond that. For me, only 2 European vacations ever got me above 10% utilization.

To correct this "problem", just have your maximums increased or get another card.
I'd have to look, but I believe my overall CC limit is about $60K, so unless I charge more than $6K in a month,
I would never go above 10% utilization.
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Uncle Pennybags
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Re: Installment loan to boost credit score.

Post by Uncle Pennybags »

MathWizard wrote:To correct this "problem", just have your maximums increased or get another card.
I was thinking about that, I only have about $18,000 limit on two cards. An increased limit would be much easier than taking out a loan and won't change my credit profile except for being able to charge more than $1,800.00 and not take a hit.
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Re: Installment loan to boost credit score.

Post by Uncle Pennybags »

I now have a six month, $1,000.00 loan from my credit union. It was a bit of a bother, they treated this like a real loan with proof of income and a sales pitch for credit insurance and a Visa card. All of this for $22.73, the total cost of the loan. I had the money put into my savings account and it will be automatically deducted every month.

I also had a credit increase on one of my credit cards. I went from $8,400 to $10,700, not much for a hard inquiry on my credit report. I'm not going to ask for one on the other; two hard inquiries are enough.

Was it worth it? Next month's FICO score will tell.
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Re: Installment loan to boost credit score.

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Got me to bookmark thread. :idea:
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Re: Installment loan to boost credit score.

Post by JasonA1987 »

When my wife and I were trying to buy a home, we took out two $1,000 loans at our bank. This was recommended by our mortgage broker. The fees and interest for each loan was around $50. I consider that a small price to qualify for a lower interest rate on a home mortgage. For someone with an extensive credit history, it would probably not be worth the time or money to do so.
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Re: Installment loan to boost credit score.

Post by chrisam314 »

Uncle Pennybags wrote:I now have a six month, $1,000.00 loan from my credit union. It was a bit of a bother, they treated this like a real loan with proof of income and a sales pitch for credit insurance and a Visa card. All of this for $22.73, the total cost of the loan. I had the money put into my savings account and it will be automatically deducted every month.

I also had a credit increase on one of my credit cards. I went from $8,400 to $10,700, not much for a hard inquiry on my credit report. I'm not going to ask for one on the other; two hard inquiries are enough.

Was it worth it? Next month's FICO score will tell.

No it wasn't worth it. You stated above that your credit score is around 800. I'm not sure why you did that. Sounds like the financial industry got paid though. They are also the ones who get people to obsess over credit scores in the first place. Go figure.
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Re: Installment loan to boost credit score.

Post by hille141 »

Uncle Pennybags wrote:I now have a six month, $1,000.00 loan from my credit union. It was a bit of a bother, they treated this like a real loan with proof of income and a sales pitch for credit insurance and a Visa card. All of this for $22.73, the total cost of the loan. I had the money put into my savings account and it will be automatically deducted every month.

I also had a credit increase on one of my credit cards. I went from $8,400 to $10,700, not much for a hard inquiry on my credit report. I'm not going to ask for one on the other; two hard inquiries are enough.

Was it worth it? Next month's FICO score will tell.
Paying interest just to increase your credit score just doesn't make any sense to me. Especially when you were already 800+.

I could understand if you had poor credit and we looking to boost it to get a lower mortgage rate.
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Re: Installment loan to boost credit score.

Post by foosball »

It was worth it for him to spend the twenty bucks so we can all see whether his score increases :D I'll make some popcorn. :sharebeer
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Re: Installment loan to boost credit score.

Post by Uncle Pennybags »

chrisam314 wrote:No it wasn't worth it. You stated above that your credit score is around 800. I'm not sure why you did that. Sounds like the financial industry got paid though. They are also the ones who get people to obsess over credit scores in the first place. Go figure.
I'm retired living a Boglehead retirement. I was more curious that "obsessed". The worth will be in the empirical evidence, knowledge is power :!:
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Re: Installment loan to boost credit score.

Post by Beth* »

Uncle Pennybags wrote:
MathWizard wrote:To correct this "problem", just have your maximums increased or get another card.
I was thinking about that, I only have about $18,000 limit on two cards. An increased limit would be much easier than taking out a loan and won't change my credit profile except for being able to charge more than $1,800.00 and not take a hit.
Personally I don't think your score falling to 800 is an issue. However, if you are concerned, just send an extra payment to the credit card company any month you have a large purchase so you minimize your utilization of the credit limit. I do this occasionally: I charge something large and then immediately go online and make an extra payment to my credit card. I could have use paid cash, I suppose, but often it is easier to use a credit card and I have an awards card so there is an incentive to charge.
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Uncle Pennybags
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Re: Installment loan to boost credit score.

Post by Uncle Pennybags »

All three of my scores have updated.

The “fako” went up. It is the one that comes with financial software; I don’t know the range of the score.

Image

This is from a credit card using FICO “B” range 250 – 900. They don’t show the new loan or credit inquires. The score went down.

Image


This from a credit card using FICO “B” top score 900 despite what their graph shows.
It doesn’t show the new loan but does show a hard inquiry. I’m lucky they show only one; it appears they combined the installment loan and credit limit increase as one inquiry.
Image
That inquiry dropped my score below 800; I’m turning yellow and getting ready to run. How can I ever show my face in public again?
:(
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Uncle Pennybags
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Re: Installment loan to boost credit score.

Post by Uncle Pennybags »

Uncle Pennybags wrote:
grabiner wrote:Landlords and employers use credit reports, but not scores.
It's the unknown unknowns of who uses what. It's scary how much "they" know about one just by what comes up on their WATS ANI.
Scarier than we knew.
"We don't turn people away," Might said, but the cable company's support staff isn't going to "spend 15 minutes setting up an iPhone app" for a customer who has a low FICO score.
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