small personal loan - tower loans

[mike00]

Hello everyone, im new here and requesting help on improving my credit, while saving up for a down payment on a house, before i go talking to lenders.

 

I took out a small loan ($1,205.40) from a company called tower loans a little over a month ago because i was inbetween jobs and i really needed it. right as i was completely broke i got this thing in the mail that really was pre-approved. i called them and no credit check, no income verification, (i said i was self-employed) and got the exact loan terms as they mailed out on the ad $1,205.40, to be paid back in 10 monthy installments.

 

anyway, i thought it would help my credit to have an installment loan (so long as i pay on time) along with my credit cards, maybe it will when its all said and done but currently it doesnt seem to be helping. two of my credit cards give me credit scores (which are always quite different from each other) one is a fico 8 bankcard score, and the other is based off of experian. they both give some of the top reasons your score isnt as high as it could be and the one based off of experian, for my august update says:

 

 

2. Total amount of credit lines and loans on recently reported open accounts is too low

Your report shows the total
credit line/loan amounts across your open, recently reported accounts is
too low. Having low credit line/loan amounts can have a negative
impact on your credit score.

 

 

would i be better off, when i go to talk to a mortgage lender, to still be paying on this loan, or would i be better to have it completely paid off (way ahead of time) when i go to talk about mortgages

 

also for what its worth, i have federal student loans which i have to start paying on in mid November. these should have payments of around $100/month if i go with the regular 10 year repayment option.

[cv91915]

Installment loans help your scores very little (but can hurt a lot if negative). Stop paying interest and pay this thing off as soon as you can.

 

You need at least three revolving accounts. It sounds like you already have two. You should consider mentioning which ones you have so you can get suggestions on which ones to add at this point.

[mike00]

i guess i should have mentioned it before, as far as credit cards go, i have four,

 

for about two years ive had

an orchard bank (hsbc) card - now owned by capital one (mastercard)

a capital one card (mastercard)

 

for the last six months or so ive had

a merrick bank credit card (visa)

a credit one credit card (visa)

 

i also have a "bill-me-later" account i use for ebay purchases

 

i just dont understand how having a SMALL loan can be bad for credit, the way its worded, it sounds like its telling me that a larger loan wouldnt be as bad.

the other messages on that site were all about length of time (too many (two) recently open, average length of time accounts established too short, too many recent inquiries) which are all about 5-6 months old now.

 

these messages dont come up on the one that gives the fico score, that site gives me two messages (at a time), one was about length of time since delinquicies (more than a year now), now it shows the one about the collection in my other post, and one about credit to debt ratio (i'm working on this one) should have that ratio down to about 15-20% in a months time.

[CG in TX]

If this is Tower Loan in MS, at that size loan you are probably paying in excess of 30% interest. That gets expensive...

[mike00]

im in IL but yeah it was pretty expensive, 28.77 apr --> financed for 10 months = roughly 13.7% interest ($25 origination fee included in that 13.7%) this is if i were to make only minimum payments

 

i wont be giving them the whole $164.60 profit however, as ive already paid a bit more than the minimum and made the 1st payment the next day.

 

not all that bad as a last resort though, if you consider that some people pay like %20 of the principal to borrow for a couple-few weeks (payday advances)

and especially if you consider that had i not got that loan, i would be talking to you all about a whole lot more credit blemishes.

(ie, eviction, all credit cards seriously late if not defaulted, another two utility bills probally in collections, etc.)

instead, now hopefully a few months later i'll be able to buy a house

 

so i get screwed for about $50 to $100 bucks (depending on how fast i pay it off) for needing to get out of a jam, kinda sucks, but oh well.

 

anyway, like I asked originally,

 

1) does anyone know why the credit scoring service suggests to me that it is a bad thing that i have a SMALL installment loan?

is it bad to have an installment loan less than a certian amount? (like smaller than your revolving line or something?)

 

2) does it look better when i go to talk to mortgage lenders in a couple-few months, to a) have that loan paid off, or be paying on that loan (about to have it paid off)

Edited September 4, 2013 by mike00

[astro]

Assumptions

1) The loan is showing on your credit report

2) If the loan is treated as a consumer finance company then these are more risky than a general installment loan and fico will downgrade the score slightly.

 

For a mortgage there are two things that you need

1) low utilization

2) sufficient payment history (this is what you are going for)

 

go talk to a mortgage officer at a local credit union (hopefully you are a member), then set a meeting with a mortgage officer and bring your credit report and ask them what they recommend.

 

FYI - I would have opened a credit builder loan with the local credit union to show payment history while building a relationship with the credit union.

[mrBlixx]

i just dont understand how having a SMALL loan can be bad for credit, the way its worded, it sounds like its telling me that a larger loan wouldnt be as bad.

Doesn't it kind of make sense that a small installment loan from a payday loan company would be a bit subprime? It makes it appear as though you NEED to borrow a small amount of money. In general, most lenders would probably prefer to see that you could get through a $1200 "emergency" without resorting to a payday loan.

 

You definitely want to pay it off ASAP and avoid this type of subprime credit in the future. Join a credit union and if you need to borrow a little cash, it's a much less damaging way of doing so. Good luck!

[mike00]

thank you for your replies,

i guess that kinda makes sense that a $1200 loan makes me look despreate, hence a risky client.

if i pay that off right away (or in the next month) before i talk to a lender, would it make me look any better than before i took it?

hopefully it wont make me look worse anyway.

 

i took this loan out in july because i was towards the end of my rope, luckily (and through persistance) i landed a decent job early in august, and i did take my check to my local credit union, and set up a checking account with them. (and a $5 savings account required for membership)

i kind of wish i would have checked out loan options at the credit union before i took the one i did, hopefully though it will do me some good (or at least not hurt me too bad) after i pay it off.

 

my credit utilization (credit cards) is currently pretty high (roughly 80%) however between the paycheck ill get tommorow, and the one ill get in another two weeks, i should be able to knock that down to next to nothing. then ill be saving for a down payment.

 

i do want to talk to a mortgage lender at the credit union (maybe a few different place to compare rates) but before i do, i have a bad mark on my credit reports from years ago from an unpaid utility bill (discussed here http://creditboards.com/forums/index.php?showtopic=517042&p=4899651) that i'd like to get deleted before i talk to a lender. and if anyone would please give me advice on that issue (details in the thread at the link above) i would really, really, really appreciate it. i'm thinking im going to try and pfd it, i'll wait a few more days to get feedback from members of this site before taking any action though.

 

thanks for all the free help, it is appreciated, and it helps people's lives

[mrBlixx]

thank you for your replies,

i guess that kinda makes sense that a $1200 loan makes me look despreate, hence a risky client.

if i pay that off right away (or in the next month) before i talk to a lender, would it make me look any better than before i took it?

hopefully it wont make me look worse anyway.

 

i took this loan out in july because i was towards the end of my rope, luckily (and through persistance) i landed a decent job early in august, and i did take my check to my local credit union, and set up a checking account with them. (and a $5 savings account required for membership)

i kind of wish i would have checked out loan options at the credit union before i took the one i did, hopefully though it will do me some good (or at least not hurt me too bad) after i pay it off.

 

my credit utilization (credit cards) is currently pretty high (roughly 80%) however between the paycheck ill get tommorow, and the one ill get in another two weeks, i should be able to knock that down to next to nothing. then ill be saving for a down payment.

 

i do want to talk to a mortgage lender at the credit union (maybe a few different place to compare rates) but before i do, i have a bad mark on my credit reports from years ago from an unpaid utility bill (discussed here http://creditboards.com/forums/index.php?showtopic=517042&p=4899651) that i'd like to get deleted before i talk to a lender. and if anyone would please give me advice on that issue (details in the thread at the link above) i would really, really, really appreciate it. i'm thinking im going to try and pfd it, i'll wait a few more days to get feedback from members of this site before taking any action though.

 

thanks for all the free help, it is appreciated, and it helps people's lives

Glad it's making sense.

 

That particular loan is kind of a double edged sword, because, on one hand as long as you keep it paid and eventually pay it off, it is a positive trade line. It's just exactly what you mentioned, that a small consumer finance type loan just weighs a bit negatively too, and also has a bit of a stigma to it. In any case, don't worry about it -- it's done. Just work really hard to get it paid off ASAP and then as you mentioned already, just basically buckle down and knock out the debt.

 

Don't get too caught up in the current real estate hype. You don't want to make the mistakes of yesteryear and bite off something you can't afford. Get the debt paid down, bulk up the savings to include the down payment and a comfortable emergency fund and then buy a house. Maybe it will take a little longer, but at least you're building something with a bit more solid foundation.

 

Honestly, it's pretty much the advice I'm trying to follow myself. Different circumstances, but I got a bit ahead of myself the first time and realize that sometimes it's better to take time & save up

[mike00]

Thanks, im glad to hear that the loan i took out will show as positive in the end.
the house im looking to buy, is not a very expensive one (for a house) its just been reduced to 32.900.
i like it (even though it needs work) because it is in a decent part of town, has a good foundation and frame, and most of all, its not that very expensive and that should make for lower taxes (since i wont get it re-appraised after i fix it up)

its just been bugging me ever since i went to go pay my rent a few months ago. money down the toilet. ive given that jerk over $5,000 in the last year with absolutely nothing to show for it. i figure with this modestly priced house, i could pay it off in five years at arount $700/month, or go for one of those 10 year mortgages that have the first 5 years at a low fixed rate and try to get it paid off in five but if not id still have most of it paid off before the higher rate would kick in.

it's going to be a little while, i want to save up 20% so that even though ill have to pay insurance on the house, i wont have to pay insurance on the mortgage.

anyway i have another question. one of my first two credit cards, which i opened back in 2011, has a late payment (less than 30 days late) in july of 2012. i had assumed that after a year of making all my payments on time it would show positive. but its still listed under "adverse accounts" and an "innovis" credit report (i know not the one you usually look at, but i'll have to pay for the others if i want them before next april) says, date expected to show positive is in 2019!!! is that how it works! i know negatives report for seven years, but in those 7 years, can you really have 83 on time payments, 1 less then 30 days late, all more than the minimum and that account is considered negative? does the credit card company or the credit reporting agency determine wether the account is considered "satisfactory" or "adverse"? if the credit card company, would it be worth it to call them and try to get them to change it? if i were to close this account (one of two around two years old, my other two are only six months old) would it help me, or hurt me to do so? i already have my experian scorer telling me "average length of time revolving accounts open is to short."

****edit****

i just got off the phone with capitalone. i told them it didnt seem fair that this was being shown as an "adverse account for making one late payment over a year ago" the guy went ahead and initiated some kind of dispute with the bureaus to try and get it shown as a satisfactory account. should i be hopeful about this, or did i waste my time on the phone? he said i should be informed by the bureaus by the end of the month.

Edited September 6, 2013 by mike00

[mike00]

woo hoo,

tower loan is paid off.

they update to beuarus in january.

[shifter]

make for lower taxes (since i wont get it re-appraised after i fix it up)

you have to check what the city has down for the assessment. first of all, it may be higher than the appraisal you get if it hasn't been recently adjusted to reflect the poor condition. also, they reassess houses each year. once you make the improvements it's very likely they'll reassess it at a higher value.