I did this back in March of this year. Anyways, my OPINION is that a secured loan with a bank can bump up your fico score. Before this loan, I had a cap1 card and a Netfirst card reporting on my EQ reports. Well, after the secured reported, my credit score jumped up about 30 points......with a new positive reason code being listed that I now have a national revolving account with a bank being reported. Really weird, but this is what the EQ score gave out as soon as the loan was reported. EQ and EXP reported as revolving, but TU reported as secured. By the way, I closed this account the same month it was opened, long story, but it is notated as paid as agreed on all three and my EQ score did jump up as soon as this was reported.
Ok. I'm going to post my opinion on length of loans and I firmly believe this to be true. I believe that you need to keep the loan for 24 mos to get a real bump. I've seen large score jumps at 24-25 mos time and time again. I've heard it from financial professionals... and I also am certain that the higher installment ratios don't really affect your score... so taking longer to pay off installment debt doesn't hurt... and the length of history is necessary for a good score. I know... you don't want to hear this. Everyone wants a great score at 12 mos... and I do think you get the most bank for the buck at 24 and then 36 mos. I can't stand 36 mos loans... so I did 24. I don't remember any special "secured" notation... it's just an installment loan I think. Regardless, installment loans are golden and integeral to building a solid history. But with USAA... it's not just a trade line. they're a relationship worth cultivating and keeping. They have some of the best loan rates out there... and if you're affiliated with the military, their insurance products are amazing! So: Keeping that in mind and looking at the cd yields... The best scenario I saw was in keeping the cd for 30 mos and making the loan a 24 month loan. I compared differing scenarios and this one made the most sense. It was positive in results, (excluding time value of money). When you add the time value of money component... cds are too conservative... but that's another issue The next best is 24/24... keeping in mind you need that 24 mos of payments. So just pay the required payment... or You could do 30/30 (you decide on length of the loan) and then you could pay off in 24... but I wouldn't lock money in a cd for any longer given the yield on cds Also, if you just open a USAA savings or checking account, you can deposit the money into that account... then tell them (once the funds hit the account) that you want both a cd and a cd secured loan. That way they can try to do it all at once and just keep the cd (otherwise, they mail it to you and you mail it back with the loan application). Also, when you open an account with them you can have them withdraw the payments directly from this account and it establishes a nice relationship with USAA. They're a great place to borrow money from... and their accounts have no minimum requirements so you don't get hit with fees like banks charge They don't pay huge interest, but the no mins are great if you use this bank as your "I'm writing checks off this bank"... and you get that first order free win-win all around. When you're done "paying off the loan" you get a cd as your reward. You'll enjoy USAA, they're one of the most professional organizations out there.
Marie, I'm still experimenting too with what length of time cd secured loan is best, but I don't think it matters too much because of my friend with the 705 score from a year history with three positive accounts. He just had a couple of short term balloons for a thousand and a cell phone account, and nothing else to warrant a high score. I think the dollar amount however is probably more important as to how favorable the loan looks.
I do think it matters which model you fall into... building vs rebuiding. However, even in the building model 24 mos appears to be optimal with a 36 mos max score attained by a trade line. Of course, that presupposes you have a file. If you are so new you need 3 trade lines to even begin, perhaps then the "12 mos is better than none" could apply. Will the real Fair Isaac employee please stand up Also, with installment loans, a more important factor is with what company are you establishing a relationship? A bank, a credit union... vs a finance company... I did discuss the models at length with a real Fico employee and he did also say that what your installment ratios are don't matter in comparison to revolving ratios... but who you establish installment loans with does matter. For example: USAA would yield a positive score in the installment category Americredit, in comparison, would yield a decidely less positive yield in the same category with the same info... (b/c a Finance company installment loan is negative in nature)... a real bank won't touch you and all that. However, in the revolving category, who you're banking with means significantly less than what your ratios are... because the model presumes that if you're in financial trouble you may get an installment loan from a bank.. then from a finance company... run up your credit cards... start running late on the credit cards (but keep up with the car and house installment loans)... and then finally the installments will start going delinquent... so that's how they weigh the factors... and it actually makes sense. Who would jeopardize your car or house when you can just skip a few credit card payments... truth at its finest. I've been told to stay completely away from the 90 days same as credit stuff (even from reputable companies: Best Buys, Rooms to Go etc). As a rebuilding strategy, it's wrong. They may actually hurt your score ;( If you already are hitting 800s.. these factors affect you much less, of course. Your score may take that hit and still be in the ultimately prime category... whereas if you start in the moderately prime category, a great deal with Rooms to Go could sink your score... even if the 0 financing is a great deal...
If you had a "BUNCH" of 30-60-90 day lates and mabe a CAR REPO...you would still have a better score than someone with NO CREDIT... They say BAD credit is BETTER than NO credit...
Marie, do you know all this for a fact? Will they waive the lengthy loan application process if it's done all at once? Saar
You still have to do the application and it is overnighted to you and you overnight it back. They have to have the signed form in hand. My point was simply that if you got the cd first without telling them what you want to do then you'd have to wait to get it mailed to you then mail it back with the application packet. This could take more time since the cd can take a week or more to get. I did mine this way and was told afterwards they could have generated the cd and then kept it and saved me the time while I was waiting for the cd to arrive. (the loan application arrived first) The actual loan packet comes to you very quickly. It's actually a very quick application process. Even if you apply for the loan on Sat they overnight you the loan package... you get it on Monday. They're very professional. But you don't get to waive the application process... I was just referring to mailing time Maybe that's the better way anyway. I made a copy of my cd for my records before sending it back.
Marie, has your loan shown up on your credit report? I opened a usaa cd secured loan and it still isn't on my experian yet, although it hasn't been a full month yet...
I don't remember exactly, but no credit check, and didn't ask about employment I'm pretty sure. As I recall they didn't ask too many questions, afterall it is guaranteed free money for them!
Took about a month and a half or so... they report monthly to all 3 so if it stalls it's the bureaus surprise surprise. So you'll have to wait for the close of the first cycle... it reports... the bureaus put it on the report... depending on when you get it... could be 1 1/2 to 2 1/2 months before you see it... Mine just says installment... I don't see any special notation or anything... but then again, on installments most are secured by something so it really would matter so much less than say a secured cardit card. also, Fair Isaac stated that the tier banks are better but matter less on installment loans... so USAA would definitely qualify as a "real" bank or credit union but the only real item installments get hammered for is if it's a finance installment loan (those are the score killers)... USAA will look great on a manual review though since it's a tier 1 institution.
Pull your EFX online. Go to the "public record" section. Mine shows "no secured loans". I don't know if it means secured loans are score killers, but I'm not gonna find out (Mortgages and car loans are, of course, also secured, but are coded differently). Thanks for your input! Saar
my usaa loan only showed up on TU despite my calling and following up with USAA (they said they would correct it, but haven't). So far I've had better luck with the Golden1. I've had things misreported by the golden1 and they've been very good about fixing the errors on the credit reports.
wow, a couple of interesting things... just watching my equifax report and all of a sudden I got about a 40 point jump in the fico score. The exact same thing as what happened to cinderella above happened to me. USAA finally reported on all three bureaus and it looks like they aren't being reported as secured(I think this resulted in the score boost). I had no installment loans before, but a bunch of credit cards and cd secured loans and no derogs. Saar, On my credit report it lists also no secured loans, but then later on I have golden 1 accounts that clearly say under them 'secured loan'. Maybe one of the programmers had too much jolt cola that day?
In Feb. I got some secured loans through two different banks backed by cd's. I was told to absolutely not pay them off early because it would not help my scores. I paid two off early and got 50 points on each cb. I then renewed them and did new loans on the same cd's. I just paid those off this week. You do get a huge score boost, at least we did. So far we have 4 completely paid off tradelines on your reports, it really raised our scores a lot and was well worth having that money tied up. Even though our scores are still in the very low 600's, high 500's we can now go to these banks and borrow money and we don't have to have collateral. When I posted what I had done here, some posters told me opening that many new accounts was the kiss of death and I should not have done them for 6 months. This did nothing but help us so I am glad we took the plunge.
