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Take Out Installment Loan to Boost Credit Score?


dollerprod
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TL;DR: If you only have a couple of revolving accounts and need to bump up your score, is taking out an installment loan a good thing to add to your file to increase score quick?

 

Hi, I am trying to do everything I can to be (better)qualified for a home loan. Long story short, scores are TU660, EQ644, EX596 (fico), so I need every point I can get. Anyway, I had a meeting with a credit counselor (if that's the right term) and he did give me some advice. Now I have no reason to doubt his advice, and he seemed knowledgeable and had a nice office in an office building, but I was having what you could call a tough day and some things didn't  "sink in" and there's some things I forgot to ask. 

 

Now that you are up to speed, why am I bothering you.....?

 

Well, he suggested that I open an installment account loan to boost my score. At the moment I only have two revolving accounts. Between that and a couple of other things He said it might raise it upwards of 50 points!? Cool! But I have some questions about this.. It's for $1,000, 24 months @ $44.05 ($1,057)

 

I'm sure he would help me out with this if I contacted him, but I'm at work and cannot call him directly, it's on my mind and I'm pressed for time...

 

If I did proceed with this Installment Loan process- Wouldn't that decrease the Average Age of Accounts? In other words,will it initially hurt my score because it is a new account? Or would the fact that I'm adding this "type" of account to my revolving accounts outweigh that? Would it look weird to a loan officer that I took out this measly loan and applied for a mortgage the following month? I need to apply now, lease is up, baby on the way, finances in good order, but unfortunately not sparkling credit. 

 

Is it really this easy to bump my score up substantially by doing this? Like some secret loophole.. Or will it initially have the opposite effect? It probably needs to stay on there for a few months before it helps more than hurts is my best guess. 

 

Like I said the man was really helpful and he didn't push me out the door but I just forgot to ask this. Thanks if you can offer any advice until I can make contact with him.

 

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If you're wondering what the "other things" he suggested to raise score, basically to settle and PFD two small emergency room visits @ $190 each. Aside from that all I have is a 3.5 yr old cable bill- not much I can do about... and an old old old secured card from 6.5 yrs ago- he said don't touch.


 


Maybe you don't need this but here are some bullet points from that info sheet:


  • Bank pledges the collateral.
  • Basically that there is no circumstance that you (I) would not be approved.
  • Automatic loan payments from a checking or savings with the bank.
  • No prepayment penalties.
  • Rate of loan: Deposit Rate +5%
  • Term of loan must match term of CD being established as collateral
  • Interest method: Simple Interest
  • Repayment: Principal and interest

He suggested to me $1,000, 24 months @ $44.05 ($1,057)

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Settle your two ER bills...pay the cable bill...put your $1000 in a savings account.

 

Go talk with a bank about a mortgage.

 

Chances are, 30-45 days after you pay off your baddies, your actual FICO Mortgage Scores will be in the mid to upper 600's...without playing any "utiliization" tricks (that's for the sucker scores).

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