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Secured Loan - Start small and build up, or just go for it?


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We've all read about building credit via a secured loan. I'm looking for a bit of clarification.

I have $20,000 or so at my disposal, opened accounts at 2 credit unions and I'm ready to go. I only have the $20,000 at my disposal now, it won't be available in 6 months.

Scenario #1:

Take out a secured loan for $1,000 at CU #1.

Take out second secured loan for $2500 at CU #2.

Come back at the end of 6 months and do it all again with higher loan amounts. Rinse, repeat as desired.

(Pay off via 6 month plan, 50% first month, 25% second month, 6.25% remaining 4 months.)

Scenario #2:

Take out secured loan of $20,000 now and pay it off via 6 month plan.

These are just possibilities, I am completely open to suggestions, maybe some combination of the two.

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I talked to the manager at my bank about doing the secured loan thing. She told me that the loan nust be above $1000 and the term of the loan must be for over a year. They don't report it for the fist 6 months. She also gave me a 3.71% intrest rate. After 6 months, it will show up on my reports as a loan and not a secured loan. Your bank may be diff. Go talk to your loan manager.

If I may ask, why whould you not have the money after 6 months? Will it burn a hole in your pocket that fast?

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Mine's been reporting for almost 3 years as secured.

It's true... like any other account, it doesn't really help you until after 6 months. I can't see how having a series of small, short-term accounts on your report could help.

Chris, can you tell us something about your circumstances and what you're looking/need to achieve? Do you just need quick, inquiry-free TLs, or a score boost?

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The money will be gone in 6 months because it will be invested in real estate. The money is proceeds from real estate, and it needs to be invested (1031 exchange) in 6 months. Anything longer and I'll have to pay capital gains tax.

My situation is this:

My credit report has 3 entries, 1 capital one chargeoff from 2002, 1 BOA credit line that has 2x 30 lates from 2002, and an Orchard card that's at 10% utilization, been reporting for 2 months.

My credit scores are low to mid 600's (see signature), and I'm in search of the path to 700. My goal is to be able to get a mortgage ASAP. The secured loan idea came from the sticky in this forum.

Does that help a bit?

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After 6 months, it will show up on my reports as a loan and not a secured loan. Your bank may be diff. Go talk to your loan manager.

That is a very good arrangement...

You must talk to the loan manager or someone in the loan department. A lot of people feel intimidated or they just want to talk to a customer service rep who really doesn't know anything about it...

You got to talk to the right people... Managers are the best although it is easier in some places than others... And nothing to be afraid of when talking to a manger...They have been doing it for a very long time...

Also, be blunt with them... Especially the part how it shows up as "unsecured" because you need to tell them up front that you will do the pay off immediately if it really is secured during the entire time...

And most importantly, you are interested in longevity...

Too many people are fixated on doing a quickie, thinking that is all they need to rebuild their credit... Like six months... The people who have the best scores have accounts that are like 10 or 20 years old with plenty of things paid off like cars, houses, etc... They didn't do it in six months...

This is what I would recommend....

Get plenty of small notes... Like four, five or six... Instead of just one big one... And the longer, the better...

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