Installment Loan Hack: A Double Edged Sword

[PotO]

A couple of years ago I experimented with the installment loan hack and verified that it does work. I took out a 5-year loan for $30k from my favorite bank and, as soon as it posted, I paid it all off except for $100. My next payment was somewhere in 2024. The effects on my FICO were virtually instant -- from 820 to 850.

 

A couple of months ago I got tired of seeing it on my spreadsheet and just paid it off. This week it just hit my credit reports as closed. And my FICO dropped around 27 fooking points on all three CRAs.

 

EX, which was always my weakest, went to 797.

 

I suppose I need to unfreeze EQ and take the hit for another installment loan.

 

 

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[hegemony]

what is your favorite bank?

[PotO]

what is your favorite bank?

While none are perfect, USAA comes closest.

That could change, though, when Hegebank opens.

Were I a thief in a pink-flowered jacket, I would have answered Skank of America.


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[cashnocredit]

My old paid mortgage fell off my reports about 2 months ago. FICOs dropped from typically 820 to 810 with my usual monthly balances (10% total util). However, they became much more sensitive to util changes. Had a temporary increase to about 20% and FICOs dropped to about 790. For similar changes when the paid mortgage reported drops were about half that almost never going below 800 unless I had 30% util or more.

 

Out of curiousity I pulled my full reports to check softs and the drop seems to have triggered ARs from just about everyone. Normally ARs are at regular intervals of every 6 to 12 months. So it appears out of sequence AR triggers are FICO related rather than something else specific to the reports.

 

So apparently that 10 y/o closed (0 balance)  mortgage had significant impact on scores. Consistent with a installment loan and a small balance haiving a really big effect.

[hdporter]

If I had an installment loan age off and my FICO 8's dropped to 760+, I'd largely treat it as a non-event.

[PotO]

My old paid mortgage fell off my reports about 2 months ago. FICOs dropped from typically 820 to 810 with my usual monthly balances (10% total util). However, they became much more sensitive to util changes. Had a temporary increase to about 20% and FICOs dropped to about 790. For similar changes when the paid mortgage reported drops were about half that almost never going below 800 unless I had 30% util or more.
 
Out of curiousity I pulled my full reports to check softs and the drop seems to have triggered ARs from just about everyone. Normally ARs are at regular intervals of every 6 to 12 months. So it appears out of sequence AR triggers are FICO related rather than something else specific to the reports.
 
So apparently that 10 y/o closed (0 balance)  mortgage had significant impact on scores. Consistent with a installment loan and a small balance haiving a really big effect.

Yes, mortgages are basically installment loans and when it falls off it can trigger the changes a closed installment loan often causes.

And while it may be a non-event for us, it is still something to analyze. There are also those for whom a 20-point drop is indeed a big event.

I sort of like having an 850. I am thinking of applying for another 5-year personal loan to take advantage of the installment loan hack again.

And thanks for the date about the soft inquiries. I can see where a significant score drop would cause that. I think I will go and check mine now!


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[cashnocredit]

14 hours ago, PotO said:

Yes, mortgages are basically installment loans and when it falls off it can trigger the changes a closed installment loan often causes.
And while it may be a non-event for us, it is still something to analyze. There are also those for whom a 20-point drop is indeed a big event.
 

Interesting coincidence? Today I got snail mail from Amex that offered 20,000 MR point for "activating" POT (Pay Over Time). Normally they send out 10k offers twice a year or so. 

[PotO]

Interesting coincidence? Today I got snail mail from Amex that offered 20,000 MR point for "activating" POT (Pay Over Time). Normally they send out 10k offers twice a year or so. 

Lately AmEx has had some interesting offers. Usually I can get 5,000 MRP for adding an AU, but yesterday they were offering me 20,000. I'm searching for candidates right now.


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[credithoarder]

Interesting experiment. I am days away from having two separate auto-loans drop off of my CRs and a new one opening up the same day (Dec 31 - Jan 3rd). 

 

I just got a big ding (- 20 points) on EX after adding an Amex Rose Gold card last wee. Surely the two loan drop-offs will drag it down even further, but I wonder if the new loan will quickly bring the numbers back up if all this happens on the same day.  

[FarFromHome]

On 10/18/2021 at 10:52 PM, PotO said:

Yes, mortgages are basically installment loans and when it falls off it can trigger the changes a closed installment loan often causes.

And while it may be a non-event for us, it is still something to analyze. There are also those for whom a 20-point drop is indeed a big event.

I sort of like having an 850. I am thinking of applying for another 5-year personal loan to take advantage of the installment loan hack again.

And thanks for the date about the soft inquiries. I can see where a significant score drop would cause that. I think I will go and check mine now!


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Was that the only installment loan you had reporting at that time?  The last payment on my auto loan is in two months.  After rebuilding my scores to a respectable number, I'm hoping not to see any kind of significant drop, especially since within the next year we intend to start building a house.  I'm hoping that since I have two student loans currently in repayment, that the drop from the auto loan will be insignificant as the CB will still be showing those loans as well.  

[PotO]

Interesting experiment. I am days away from having two separate auto-loans drop off of my CRs and a new one opening up the same day (Dec 31 - Jan 3rd). 
 
I just got a big ding (- 20 points) on EX after adding an Amex Rose Gold card last wee. Surely the two loan drop-offs will drag it down even further, but I wonder if the new loan will quickly bring the numbers back up if all this happens on the same day.  

No.

The loan doesn't give a big increase until it is paid down to approximately 25% of the initial loan amount.


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[PotO]

Was that the only installment loan you had reporting at that time?  The last payment on my auto loan is in two months.  After rebuilding my scores to a respectable number, I'm hoping not to see any kind of significant drop, especially since within the next year we intend to start building a house.  I'm hoping that since I have two student loans currently in repayment, that the drop from the auto loan will be insignificant as the CB will still be showing those loans as well.  

I am not sure how student loans are calculated or even if they are.

For a loan to result in a FICO boost it has to be paid down to around 25% of the original loan amount. It isn't just having the loan that gives you the big increase, but having the loan and paying it down significantly. Once it is paid off and that reflects on your credit reports, you lose all but a few of the original boost you obtained.

A really simple example would be if you obtained a 1-year personal loan for $1,200. You will not get a FICO boost until the balance on that loan reports as around $1,000. If it takes you ten months or ten days to reach that balance is irrelevant. Once the loan is showing paid off on your credit reports, you will lose all but a few points obtained from the original boost.

If you pay it off but have other loans on your credit reports, unless they are paid down around 80%, it will have no effect and you will lose those points.


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[credithoarder]

What is your recommendation to sustain a continual boost or bump from loans? 

 

I am currently carrying two loans for the purpose of maintaining some "good debt" to pad my credit mix. One is an auto loan (48 months) and the other a purchase loan with a 24 month interest fee special.  These loans are relatively new and I have not developed a strategy on how to maximize the benefits from them yet.

 

IMO, my scores suck and I am sure it's primarily because I have a thin CR profile. I would appreciate any feedback on if/how I can manage these existing loans to optimize my score potential. At this point, I plan on staying in the garden until early 2024 and will only reach for CLIs on existing CCs in the meantime.

 

Credit Profile

 

History:

• < 2 years of established credit history.
• Zero derogatory marks (i.e. late payment, charge offs, etc..) on my CR profile.
• 32 Inquiries in the past 6 months.
• Credit limit balance = $25k. 
• CC utilization is at 1% (I have been carrying a $2 balance using the AZEO hack).  .  
• Current loan balance = $60K (with only one billing cycle payment made total on each of the two existing loans). 

Scores:

 

EQ = 725

TU = 766

EX = 712

 

Income & Debt:

• Current outstanding debt are the loans above + home utilities (no mortgage or rent). 
• My current monthly income is $15k.
• Monthly DTI < 15%

 

Thanks in advance.

 

 

 

 

 

 

Edited December 31, 2021 by credithoarder

[hegemony]

57 minutes ago, credithoarder said:

What is your recommendation to sustain a continual boost or bump from loans? 

 

[snip]

 

IMO, my scores suck and I am sure it's primarily because I have a thin CR profile. I would appreciate any feedback on if/how I can manage these existing loans to optimize my score potential. At this point, I plan on staying in the garden until early 2024 and will only reach for CLIs on existing CCs in the meantime.

 

 

 

 

 

 

 

 

 

if those are FICO scores then your scores do not suck, especially with a thin file. IMHO you don't need another installment loan and are probably getting only minor help by having the two. I would never pay interest just for a few FICO points.

 

 

the best long term strategy is to open revolving accounts that match your spending pattern.

[credithoarder]

1 hour ago, hegemony said:

 

if those are FICO scores then your scores do not suck, especially with a thin file. IMHO you don't need another installment loan and are probably getting only minor help by having the two. I would never pay interest just for a few FICO points.

 

 

the best long term strategy is to open revolving accounts that match your spending pattern.

 

Those are current scores from a Myfico.com premium sub. 

 

I haven't figured out if I need to make extra payments towards my loan principal. I am worried that by doing so, I will pay off the loan too soon before it could help my credit worthiness.

 

The common refrain I get about credit limit increases is that I do not have a single revolving CC that is $5k+ and 5+ years old. I tried to get a personal unsecured loan for $5k just to see if I would qualify, but the loan officer stated that despite my reasonable DTI, I don't have the CR resume (single revolver $5k + 5 yrs) that meets their benchmark. So for now, I am trying to get one of my lenders to raise my CC limit at least to $5k. I just recently received a CLI on one ( non - Visa/Mastercard) store branded card (Synchrony) that is now $7k, but I don't think CC lenders (i.e. BOA, Chase, Citi) care much about what store card lenders are doing. They seem to care more about what how much capital others CC lenders are extending to me. 

 

 

[PotO]

 
Those are current scores from a Myfico.com premium sub. 
 
I haven't figured out if I need to make extra payments towards my loan principal. I am worried that by doing so, I will pay off the loan too soon before it could help my credit worthiness.
 
The common refrain I get about credit limit increases is that I do not have a single revolving CC that is $5k+ and 5+ years old. I tried to get a personal unsecured loan for $5k just to see if I would qualify, but the loan officer stated that despite my reasonable DTI, I don't have the CR resume (single revolver $5k + 5 yrs) that meets their benchmark. So for now, I am trying to get one of my lenders to raise my CC limit at least to $5k. I just recently received a CLI on one ( non - Visa/Mastercard) store branded card (Synchrony) that is now $7k, but I don't think CC lenders (i.e. BOA, Chase, Citi) care much about what store card lenders are doing. They seem to care more about what how much capital others CC lenders are extending to me. 
 
 

Reading is fundamental. The absolutely best thing you can do is STFU and sit down and read. Everything has been mentioned here previously on CB ad nauseam.

For a thin file, your FICO scores are fine. @Hegemony has already clarified that. Again, RIF.

If you have two installment tradelines only to help your credit score, that's foolish. The score gain from credit mix is minimal at best. Now, once one or another of those loans is paid down approximately 80%, then you will see a sizable score jump. That increase, however, will virtually disappear once the loan is paid off.

And what exactly do you hope to accomplish with any score increase? Are you shopping for a mortgage? As far as revolving credit is concerned, virtually no credit issuer even cares about your credit score until after they have approved your application and are setting certain terms such as APR.

If you want a high FICO Score to pick up girls, that's also a waste of time. @Hegemony can give you the phone number of a nice Slovenian hooker that cares absolutely zilch about FICO.


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[credithoarder]

18 hours ago, PotO said:

Reading is fundamental. The absolutely best thing you can do is STFU and sit down and read. Everything has been mentioned here previously on CB ad nauseam.

For a thin file, your FICO scores are fine. @Hegemony has already clarified that. Again, RIF.

If you have two installment tradelines only to help your credit score, that's foolish. The score gain from credit mix is minimal at best. Now, once one or another of those loans is paid down approximately 80%, then you will see a sizable score jump. That increase, however, will virtually disappear once the loan is paid off.

And what exactly do you hope to accomplish with any score increase? Are you shopping for a mortgage? As far as revolving credit is concerned, virtually no credit issuer even cares about your credit score until after they have approved your application and are setting certain terms such as APR.

If you want a high FICO Score to pick up girls, that's also a waste of time. @Hegemony can give you the phone number of a nice Slovenian hooker that cares absolutely zilch about FICO.


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I am looking for better scores to get better card offers with higher limits. At least limits that can match my spending habits. Some of my card limits can't even cover groceries for the week.

 

I have always used cash for years because I was able to stash away a good chunk money after my friends and I sold a startup tech company and made some sizeable investments in crypto 15 years ago. Now I have a new business, but no credit history, because I was raised in a European household that drilled in the motto that cash is King and to never use credit.  However, I am now weirdly obsessed with credit cards because I never had any.

 

I have my dream house that I paid with cash, my dream car, but now I need debt just to prove to lenders I can afford to pay off higher CC limits. One CU lending agent actually told me that I don't have a perfect credit score because I probably can't afford to have one. I am guessing he said that because I looked young and was a "girl". It was an insult to me ofcourse, but I did manage to shut him up after I brought in my tax returns and investment account statements. 

 

As far as looking for girls, I tried that experiment in college. Those days lay at rest with my sorority sisters. 

Edited December 31, 2021 by credithoarder

[hdporter]

My suggestion (for @credithoarder Start a new thread (e.g. "Advice on building credit lines sought").  You've posted in a thread for which your needs no longer fall within it's topic.

 

Spell out your current card inventory (issuer, approx date issued, current CL, and most recent CLI date/amt, if applic.  Also detail your FICO 8 credit scores, source and date.

 

Things have changed up a bit since Bev and I started rebuilding in 2005 w/ $10k in card lines (we now have $1 mil+ between us), but I don't believe the fundamentals have changed all that much.  The primary issuers (Citi, Chase, BA, among others) are still generous with lines.  They like active use and typically are flush with CLI's in response (usually at 6 mo intervals).

 

Let's explore what's going on with you.  If you previously have had no recorded credit, you may need to be a bit patient for the first 2 years.  But even then, if you pick a card to put the bulk of your spending on, you should see a 5 figure limit in short order with $1000+/mo spend.

 

With a bit of detail, you should get some solid advice on how to best move forward to achieving some substantial credit lines.

Edited January 1, 2022 by hdporter

[PotO]

 
I am looking for better scores to get better card offers with higher limits. At least limits that can match my spending habits. Some of my card limits can't even cover groceries for the week.
 
I have always used cash for years because I was able to stash away a good chunk money after my friends and I sold a startup tech company and made some sizeable investments in crypto 15 years ago. Now I have a new business, but no credit history, because I was raised in a European household that drilled in the motto that cash is King and to never use credit.  However, I am now weirdly obsessed with credit cards because I never had any.
 
I have my dream house that I paid with cash, my dream car, but now I need debt just to prove to lenders I can afford to pay off higher CC limits. One CU lending agent actually told me that I don't have a perfect credit score because I probably can't afford to have one. I am guessing he said that because I looked young and was a "girl". It was an insult to me ofcourse, but I did manage to shut him up after I brought in my tax returns and investment account statements. 
 
As far as looking for girls, I tried that experiment in college. Those days lay at rest with my sorority sisters. 

Is reading comprehension a struggle?

Your FICO Score has nothing to do with your credit limits. Credit card lenders look at the raw data on your credit reports, information to supply with your request for a CLI and any data they already have on you in their system before deciding on whether or not to increase your limit.

If you have y limits, it isn't because of your FICO Score. Maybe you don't use your cards enough to justify a CLI. Maybe you have a thin file. Maybe you have bad breath. Maybe it's the COVID-19 Circus effect. Maybe you have cards from notorious cheap turds. Nobody knows for sure until they examine your case in depth. One thing we do know, it's not because of your FICO Score.

The *only* time I have seen a FICO Score influence credit limit is when issuers such as PenFed require a certain score to be approved for their gold card and not their platinum card. Their gold card has a minimum $5k limit.

Oh, and by the way, brother Hegemony's Slovenian hooker friend likely has a brother.


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[LashandaHudson]

On 12/29/2021 at 4:57 PM, FarFromHome said:

Was that the only installment loan you had reporting at that time?  The last payment on my auto Spot Loan is in two months.  After rebuilding my scores to a respectable number, I'm hoping not to see any kind of significant drop, especially since within the next year we intend to start building a house.  I'm hoping that since I have two student loans currently in repayment, that the drop from the auto loan will be insignificant as the CB will still be showing those loans as well.  

I know that the credit rating of each consumer depends on on-time debt payments, debt utilization rate, the length of the credit history, and the presence of any derogatory marks on the reports. Each of these categories affects your ability to qualify for credit products in the future. Moreover, each consumer is advised to request a free report each year and check it for any errors. But if a lending company or some other service verifies it with a hard inquiry, you may get your rating lowered by a few points. 

[AdamFriedman]

My prior paid mortgage was removed from my credit reports around two months ago. With my regular monthly balances, my FICOs decreased from 820 to 810. (10 percent total util). They did, however, become considerably more sensitive to utilitarian changes. FICOs plummeted to about 790 after a short spike of almost 20%. When the mortgage was paid off, the decreases were approximately half that, almost never dipping below 800 unless I had 30 percent util or more.
I grabbed my entire reports to check softs out of curiosity, and the decline appears to have triggered ARs from pretty about everyone. ARs are usually done every 6 to 12 months on average. As a result, it looks that out of sequence AR triggers are tied to FICO rather than something else.

[PotO]

My prior paid mortgage was removed from my credit reports around two months ago. With my regular monthly balances, my FICOs decreased from 820 to 810. (10 percent total util). They did, however, become considerably more sensitive to utilitarian changes. FICOs plummeted to about 790 after a short spike of almost 20%. When the mortgage was paid off, the decreases were approximately half that, almost never dipping below 800 unless I had 30 percent util or more.
I grabbed my entire reports to check softs out of curiosity, and the decline appears to have triggered ARs from pretty about everyone. ARs are usually done every 6 to 12 months on average. As a result, it looks that out of sequence AR triggers are tied to FICO rather than something else.

Every creditor is a member / subscriber of the credit bureau to which they report.

Just like you can set up alerts on your accounts at, for example, Chase, credit bureau subscribers can set up alerts on every tradeline they have. They set these alerts to trigger at certain specified events, but not on your FICO Score. For example, an increase in UTIL, X number of INQs, a new account ... the list is virtually endless. These alerts trigger an AR soft inquiry that is outside of the creditor's usual AR timeframe.

The alerts credit bureau subscribers receive are not tied to your FICO Score. FICO only generates a score when your credit is pulled. It's impossible they will pull your report, which will generate an INQ, get your FICO Score and then place another AR INQ.


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