Posted by Chuck on August 4, 2016
Credit Repair

Published on August 4th, 2016 | by Chuck

96

Strengthen your Credit with an Installment Loan using the Secured Loan Technique

There’s a neat trick to get an installment loan which can strengthen your credit report, without any hard pull or cost by applying for a secured loan. We’ll call it the Savings Secure Loan Technique, or SSLT.

Background

Numerous factors affect your credit rating and credit score, most importantly your payment history and credit utilization. That is, if you’ve historically paid your bills on time, and how much of your available credit you utilize (less is better). Under the FICO score algorithm, for example, those two factors make up a whopping 65% of your credit score, 35% and 30% respectively.

The other, more minor factors that affect your credit are:

  • Length of Credit History – the longer the better. This makes up 15% of your FICO score.
  • New Credit – lots of new accounts isn’t good. This makes up 10% of your FICO score.
  • Credit Mix – having varying types of credit helps. This makes up 10% of your FICO score.

This post will deal primarily with the Credit Mix factor, along with some impact on Utilization.

We’ll outline how someone can easily add an installment loan to their credit file without incurring any hard pull or costs. The information is based off this myFico thread; thanks goes to 

Credit Mix

Someone paying many credit cards on time isn’t as reliable to a bank as someone who has dealt properly with different types of loans.

Most of us have many credit cards, and these all fall under the category of revolving loans. The other main type of loan found on your credit report is installment loans, often a mortgage, car loan, or student loan.

To help your credit score, you can easily apply for an ordinary loan such as a car loan, immediately pay it off most of the way, then slowly pay off the remaining balance over time. You won’t incur much cost since you’re only paying interest on the small balance.

The problem with this method is twofold. First, you’ll  sustain a hard pull when applying for the loan; they may even pull more than one credit bureau. Second, loans aren’t always easy to get approved for, especially for someone without strong credit or someone whose income is low.

Enter: Secured Loan Trick

Many banks offer the option to apply for a Savings Secure Loan where you have the full amount of money on deposit with the bank in a savings account so that if you default on the loan they won’t lose out.

In fact, mortgages and car loans are types of secure loans. The Savings Secure Loan is a stronger kind of secured loan, backed by money held in a savings account with the issuing bank. The money in the savings account is frozen until the loan is paid back, leaving no risk for the bank. As the loan is slowly paid up, the money is slowly unfrozen and can be used.

When applying for a SSL, some banks or credit unions won’t do any hard pull since the money is 100% guaranteed by the savings account. Also, it’s easy to get approved for such a loan since there’s no risk to the bank. The main reason this type of loan exists is to help people build credit.

How-To

The trick is to find a bank who doesn’t do a hard pull when opening an account and taking out a secured loan. The most common option is Alliant Credit Union since they’re known not to hard pull for joining the credit union and applying for checking or savings accounts.

Even when applying for a Secure Loan many myFico members confirm that Alliant doesn’t hard pull, despite the typical terminology you’ll see during the loan process indicating that your credit will be reviewed. There might be other banks or credit unions that work as well.

Let’s use Alliant as our example since it’s been tried and tested.

To maximize the benefit of this technique, we want a small loan for a long period of time. With Alliant, we’ll choose a $500 loan for a 60-month loan period.

  • First, become a member. Alliant Credit Union is open to select groups. Most of us become members by donating $10 to Foster Care to Success. There is a $5 signup bonus from Alliant, bringing down the net cost to just $5.
  • During the membership signup, indicate that you want to open a Savings account as well. Their savings account is worth having anyway due to its relatively high interest rate, currently 1% APY. (Take a look at their checking account too while you’re at it.)
  • Next add $510 to your Alliant savings account. Wait a couple days until the money appears.
  • Next apply for a Savings Secure Loan from Alliant, alternatively called Shared Secure Loan. Apply for a $500 loan for a 60-month duration.
  • Next pay down most of the loan. Pay $420 and leave $80 remaining. The goal is to get to around $455 paid off and $45 outstanding for the remainder of the loan as this is the magic number from a credit perspective.
  • At this point, you are paid off most of the way through the loan, and you technically don’t have to make payments until close the end. It might be worth making payments every few months to avoid inactivity.
  • As you get closer the end of the loan (the final six months or year), you’ll have real required payments to make. Be sure you stay on top of those and don’t default. Mark it down on the calendar.

Within a few months, the loan should show up on your credit report and benefit your credit rating.

I’ve written the basic details here, but if you’re holding by actually going through with this, do yourself a favor and read this very clear, step-by-step walk-through on myFico. It’s also worth reading the detailed explanation of the credit benefits of SSLT on myFico (2 posts) which are also well written.

Things to Know

  • This trick is not useful for anyone who already has a mortgage, car loan, or other installment loan.
  • This trick won’t help your credit immediately; it will take a few months for the benefit to trickle down.
  • Only do this if you have $500 to tie up for a few months.
  • Beware that there is always some risk that Alliant can change course and start hard pulling when applying for a secured loan.

Aside from benefitting your Credit Mix (10%), this SSLT will also benefit your credit utilization (30%) since your ‘installment utilization’ will be very low as most of the loan was paid off and only a small amount is being carried over month to month. Installment utilization is calculated in your credit rating separate from your revolving loan utilization (credit cards), hence the benefit to your Utilization, even if you have multiple credit cards with low balances.

Final Thoughts

I found this technique very interesting since I fall into the category of those without anything on their credit report besides for credit cards, and this is a neat way to remedy that. It’s doubtful that it will make a difference for my future credit card approvals since I have a thick and strong credit report based on revolving loans. In my case, it’s more about helping for other types or loans or financing options that might come up in the future.

For those with thinner credit files, this can even help with credit card approvals in the future.

Hat tip to @noonradar



96 Responses to Strengthen your Credit with an Installment Loan using the Secured Loan Technique

  1. Dan says:

    Can you comment if this loan would be beneficial to someone who only has credit cards and student loans? Are student loans installment loans and therefore would I not benefit much from taking out this type of loan?

    • IOException says:

      Student loans are installment loans (you pay them in installments). If you’re a recent graduate, then the balances will be high and creditors know you can’t escape them through bankruptcy, so I suspect it’ll count against you. Positive history is positive history, tho. If you’ve been paying them down, I’m sure this trick won’t help you.

      • CGID says:

        IOException is right. If you already have open installment loans (and student loans or installment loans) you should not expect any help from the technique.

        The myFICO guidance explains why in the second post of that thread.

        I’d be mildly interested in someone who only has student loans on his report AND which are flagged as “in deferment” (e.g. he’s a junior in college). I am almost certain that FICO counts these as normal loans when it does its installment utilization calculation…. BUT… if such a person were to use the SSL technique and get a big benefit, that would prove I am mistaken in this narrow case and that would be useful to know.

        • IOException says:

          If it is a federally subsidised loan, then payments are technically being made to the loan servicer. It’s just the govt that’s paying them.

          If it is an unsubsidised loan and no payments are being made, being in deferment doesn’t hurt (but doesn’t help). IMO, pay the interest if you can swing it. Compounding interest is a bitch when it’s not in your favour.

    • Chuck says:

      Dan, I added student loans into the post as an example of installment loans. Thanks for pointing out.

  2. Dan says:

    The person who mentioned that this process works at Navy Federal failed to mention that they do a hard pull on your TransUnion credit report. I mentioned this a couple months ago at the link below.

    https://www.doctorofcredit.com/bank-accounts/is-opening-a-bank-account-a-soft-or-hard-pull/#comment-265231

  3. James says:

    Not sure if plagiarism.. Wouldn’t it have been good enough to just summarize the target audience then link to the MyFICO thread? Why paraphrase/re-organize the rest of the content for use on this site?

    • Chuck says:

      I think that is more of less what we did in this post.

      I guess you could argue that the Things to Know paragraph is superfluous but the overall idea is to give readers a quick look at what this entails.

      The myFico posts are quite long and exhaustive, something a casual reader wouldn’t go through.

      I certainly don’t think there’s any plagiarism at all in this post.

      • Additionally if CGID has an issue with this post, we will happily remove sections/whole post.

      • James Carson says:

        I don’t know why people are giving you such a rough time for sharing information. You do a good job of crediting others.

        • Miguel says:

          Agreed. Full credit to myFico is clear and DoC encourages people to go over there for full details.

          Plagiarism would be a post that outlines all these steps without a mention of myFico or the person that found it. Plagiarism would be DoC trumpeting the fact that they found this method all on their own.

  4. gary says:

    is scoring based on open accounts or if you had a car loan or mortgage and its closed now this would not be useful. One thing to note as well is that it will negatively affect your avg age of account so a new account may negatively impact your score for a while and will the positive in a few months offset the negatives

    • CGID says:

      Hi Gary. This technique gives a strong benefit to anyone who has no open installment loans.

      It’s quite possible that it gives an even greater benefit to a person with no installment accounts of any kind, closed or open, but if so the degree of extra benefit is small and difficult to test.

      A wealth of test data shows a strong benefit to the technique for people with no open I-loans, especially when they choose a lender that does not do a hard pull (e.g. Alliant).

      You are right that adding any new account will lower one’s AAoA. Good point. Here is what the myFICO guidance (on the SSL technique) says on that subject

      =================

      AAoA is a factor from the Length of Credit History category. Your AAoA will necessarily go down when you add a new account (e.g. this loan) which in itself can cause a score drop. But you shouldn’t worry about that.

      One reason not to worry is that a decrease in AAoA often does not result in a score drop. If, for example, your AAoA went from 2.8 to 2.1, it would not cause a hit to your score, since FICO looks at the integer value.

      Another reason is that, assuming you did cross over an integer value, you would likely cross back over it fairly soon. (Example: if your AAoA went from 3.2 to 2.8, you would be back to an AAoA > 3.0 in a few months.)

      Finally, even if your AAoA goes down in the short term, the bonus from the other scoring categories is greater (for a person with no installment loans).

      • Chuck says:

        CGID, I’m surprised that someone with a strong history of paying down installment loans would gain from this when they don’t have any currently open installment loans. My guess would have been that the history is sufficient, but I’ll take it from an expert 🙂

        • CGID says:

          Yep, you’d think that FICO would have designed their models, certainly the widely used FICO 8 classic, so that it looks at how many installment loans have you taken out and slowly paid down over time. If you have done that a lot, never been late, etc. (e.g. a ten year history on three student loans and also three consecutive auto loans) you’d think that FICO would give you a ton of points for that.

          Strangely, they don’t. A common source of bewilderment on the myFICO site is newcomers saying “I made my last payment on my last installment loan, and suddenly my score dropped like a rock.”

          Now it is conceivable that the latest FICO 9 might do better in that area — perhaps it doesn’t place so much scoring emphasis on a person having current open installment debt that is mostly but not entirely paid off. FICO 9 is so new (and almost no lenders are using it) that little test data exists on it. But there is simply no question that this is the way FICO 8 works (and largely previous versions of FICO).

          Again, is that crazy? Arguably. But the SSL technique was identified not as a way of defending how FICO works but identifying how it works and helping people get around its peculiarities.

          • Kevin says:

            wow. This entire article and theory is based on a misunderstanding. The ‘credit mix category’ can’t be taken literally. You don’t get a boost for having each type of loan. You only get a boost for having revolving credit lines. It should be called the ‘revolving credit lines’ FICO category.

  5. Matt K says:

    Any age restriction? My 7 mo old needs to get a mix since he only has a credit card on report 🙂

  6. Duncan says:

    America’s First Federal CU will also do these (I had a couple of secured loans there, they both reported.)

    This is also useful if you are at the beginning of your credit journey and want to add some ne trade lines that will help your average account age in a couple of years. In that case, get 2 loans, not just one.

    I don’t think you mentioned that the cash in your savings account is freed up as the balance goes down. So, if you pay the loan down to $80, you could actually withdraw anything over that. In fact, you could make the payment from your savings account.

    Also, don’t abuse this. The CU makes money from you paying interest, and paying off loans quickly actually turns a profitable one into a loss from the perspective on the CU, so don’t abuse.

    • Chuck says:

      Duncan, thanks for the info.

      Do you know if AFFCU hard pulls for becoming a member or for applying for a secured loan?

    • Dan says:

      What do you consider “abuse”? Are you suggesting that you should not pay the bulk of the loan off quickly, and instead pay it off one payment at a time? I doubt nearly as many people would be interested in doing this if it was going to cost them money.

  7. Logan says:

    just an FYI from my experience:

    The loan officer was giving me a hard time about applying for a $500 loan for 5 years and he insisted on me move it to 1 year as its such a small loan and it shouldnt take me that long to rebuild credit (to me this is none of their dam business and they aren’t anyone of authority to tell me how long it will take for me to rebuild credit, but i let it slide) and so..
    I complained that I would dispute it with CFPB or other government agencies if they didn’t honor the 5 year since its a valid option on their website.
    They eventually gave in and let me do the 5 year loan for $500 but you may or may not run into something like this.

    • CGID says:

      Hi Logan. Can you tell us the lender this happened with?

      • Logan says:

        Alliant CU. I was able to get it but there was some pushback at first.

        • Dan says:

          I heard of this happening on the MyFICO forums, too. Sounds like you just got unlucky by getting a reluctant loan officer.

        • CGID says:

          Dan sounds right. It’s happened at Alliant but it is very rare.

          Unfortunately, the reality is that we in the credit game are eventually going to run into a bank or CC rep who doesn’t understand his companies policies or is otherwise difficult. Open up enough bank accounts or credit cards and eventually it’s gonna happen even at the best institution.

          Sorry you had bad luck with that rep but glad it worked out!

  8. Sid says:

    I recently closed my auto loan and have too many hard inquiries this year. My credit score is in ~ 700 because of that. Will this help to boost my score in near term?

    • CGID says:

      Hi Sid. Assuming that your auto loan was your only open installment loan, then yes. This technique gives a strong benefit to anyone who has no open installment loans.

  9. Mist Soalar says:

    has anyone tried this with CCU?

  10. aditya says:

    Hi ,

    This is out of the topic question for Alliant Balance Transfer.

    Can anyone tell me, had anyone got the BT from alliant into your checking account rather than transfer to card.

  11. Vasv says:

    very interesting! my scenario I am looking for new car and may go for a car loan in 6 months. does this SSLT helps if i follow this process before my car loan? since I am anyway going for car loan sslt may not be much benefit after car loan? please advice. Thanks!

    • Prashanth says:

      The advantage here is showing that u paid more than 90% on ur loan

    • Chuck says:

      I guess it can help your approval odds for the car loan (if you think there’s a chance of it being denied).

    • CGID says:

      Yes, the SSLT helps a great deal in preparation for a major installment loan like a car or a house — again, assuming that the person has no open installment loans during the runup to applying for it. Once you add the big loan (the car, the house, whatever) then the big loan and its largely unpaid balance dominates your installment utilization and you will lose many of the points you gained.

      But who cares, right? You got the sweet terms for the house, which is all that matters. Not a problem if your score goes down because you don’t need it at that point.

      For what it is worth, many of the folks asking questions would benefit a lot from reading the first two posts on the myFICO thread. I like this DoC piece a lot (!!!) but those first two posts give you the tools for understanding why the technique works, what situations it will work for, and what it won’t work for.

      Just a thought….

  12. Rav says:

    Is there any reason you can’t pay down to $5-10? Do you need to have it stay a bit shy of 10%?

    Wouldn’t this also benefit someone who wants to bring their total installment loan balances down? I know you might need a lot more, but we’ve all been happy to let $15,000 sit in Chase for six months.

    • themanwhocan says:

      The key is finding a credit union that has a shared secure loan that doesn’t have any Gotcha’s. This isn’t as easy as you might think. You might have required minimum monthly payments of $25 or more, or you might pay off most of the loan only to find that the credit union manually changes your next payment date to be only 3-6 months into the future, etc.

      When these things are in place, it prevents you from keeping your installment loan ‘utilization’, for lack of a better term, below 10% for a long period of time, which is where the real FICO benefits occur. So you should really read those links that were provided, and if you really want to try a different credit union, know the questions you need to ask them before applying for the loan.

    • Chuck says:

      Rav, apparently, data indicates that around 9% is the sweet spot for your credit score with regards to installments loans.

    • CGID says:

      TheManWhoCan gave a helpful reply. Great points.

      Rav has asked a good question. As far as I know, you would get the same benefit from having a total installment utilization anywhere between 0.1% and 8.99%. It’s much like credit cards. The general wisdom is that your total CC utilization can be anywhere between 0.1% and 8.99% with the same scoring advantage.

      But… and here’s the kicker…

      When a balance is extremely low on an account, it can result in it being reported as zero (some CC issuers will occasionally do this for balances < $3). Worse still, with an installment loan it can result in the account being closed — rare but possible.

      Back in April I did some careful planning with a very smart rep for my student loan handler (I was doing something very similar, reducing my huge student loan balance to a very low dollar figure so that I could still keep it open for years but pay almost no interest). She was on my side and trying to help me out. I asked the same question — was there any reason not to pay it down to $5 say. She said that their company had been known to comb through their accounts and close all of them that had an ultralow balance. She therefore advised me to make sure my balance stayed above $31.

      Thus, I crafted the myFICO guidance so that it recommends lowering it to $44 (8.9%) and still gives you room to make $1 payments every six months to avoid the yearly inactivity fees, all while keeping the balance above $31. Of course, this 31-dollar cutoff is just based on what one CSR working at one institution told me. Still it seem reasonable to avoid ultra-ultra-ultra low dollar values for accounts if you need them to be reporting positive values for credit purposes.

  13. Nic says:

    Funny enough I had this thought when I was 18 and worked for a large regional bank. I put $1,000 into a CD and then tried to get a $1,000 loan using the CD as collateral to try and start building my credit. They did a hard pull and – DENIED! smh….

    • Miguel says:

      Even when you work for them, banks sure are stingy sometimes. The one I worked for only gave me $500 on their card even when coded as an employee. Now, only 2 months previous I got the SallieMae World MC with a $6000 line.

  14. James Carson says:

    I thought the terminology was savings-secured loan or share-secured loan, i.e. a loan that is secured by your savings or shares.

  15. daxihe says:

    Is it possible to get an Alliant savings without checking? So I can wait for the next checking bonus…

  16. Miguel says:

    So at the end of the 60 months and the early big payoff, how much interest will we end up paying?

  17. alcwj says:

    Do you need to wait until you paid off everything after 5 years to see the improvement on your credit report? Or you will see it right after paid off big chunk of the loan?

    • CGID says:

      You will get all the extra FICO points you can expect once the low balance (<9%) is appearing on your credit report.

      Actually if you wait until after this 5-year loan has completely paid off (which is what you just asked about) you will LOSE all the scoring benefit you obtained from it. This is why people who anticipate a long period (many many years) where they have no real installment loans will often take a "ladder" approach, adding a new SS loan every 4.5 years, just so that they always have open installment debt that is almost all paid off.

      Your question is a good one, but the fact that you are asking it means you don't yet understand how this technique works. I encourage you to read the first two posts on the myFICO thread.

      • alcwj says:

        Thanks for the info. I was expecting the answer is latter one. I just don’t understand why my credit score doesn’t increase a lot even I purposely leave like $1~3 on few of my CCs with high CL. I guess I can give this a try.

        • CGID says:

          Feel free to register a screenname with the folks over at the myFICO forum and talk through your concerns. Lots of helpful people over there.

          What I would definitely do is aim either for a CC balance of at least $5, or make it $0 (for any particular card). When a CC balance is ultra tiny, it becomes a bit of a crap shoot as to whether it will count as $0 or not.

          If you are trying to optimize your CC balances before an important credit pull, the simplest easiest to remember rule is to have one card reporting with a small positive balance (maybe $20 or so) and all the other cards reporting at $0.

          But again, to get help with what might be going on with your particular profile, head over to MF and ask them.

          • Miguel says:

            Ah, so my $0.01 monthly purchase on my two least-used CCs does nothing for my score, then? I guess I’ll keep it up to keep the cards themselves active. Thanks for being so helpful and taking the time to explain things! You’re awesome.

  18. gary says:

    will the new account impact the chase 5/24 rule?

  19. Miguel says:

    Has anyone here successfully gotten the $500/60mos loan from Alliant? I applied for it on 08-08-2016 and have not yet received the email from a loan officer.

    • CGID says:

      I did, back in March. But you probably guessed that.

      It’s very possible that Chuck’s post about the technique has resulted in far greater awareness of it and therefore a sharp intake in applications to Alliant for $500 SS loans. Alliant may need extra time to begin processing them.

      And before Chuck’s piece there was one on Reddit, all of them referencing the guidance on myFICO, which has also increased the application rate.

      I’d give them a healthy period before getting concerned about not hearing back from an LO.

      Regardless of what your experience is, please considering registering for a free account at myFICO so you can update us on that thread about how it goes.

  20. Miguel says:

    I was approved for the $500 loan today after applying on 08-08. Just waiting for the loan docs to come in so I can sign them.

  21. Anandha says:

    during loan app process, asked for spouse’s information. did anyone see that? I am living in TX.

  22. Rene says:

    Went all smoothly for me: $500 for 60 months got approved within 3 days, had a quick 5 minutes talk to a loan officer, signed docs via DocuSign. Loan paid out the same day.

    Loan Officer didn’t question for a second whether a $500 loan for 60m makes sense.

  23. Jay S. says:

    I am unable to apply for a Shared Secured Loan. Reason Invalid Promocode ‘ACU23’.
    Anyone faced this and if so, how did you workaround it? Thanks in advance.

    • CGID says:

      Hello Jay S. There is now a community of people all helping each other out on that myFICO thread (the one that Chuck linked to about the SS loan technique). I encourage you to reach out to the folks there — just post your question at the end of that thread.

      You’ll probably want to give them as much background as you can. For example, did you successfully apply for membership and set up your savings account? Was it fully funded before you applied for the SS loan? Were you trying to use some kind of “promotion” at any point, e.g. a promotion for open a checking account say?

      Also, you may find your question answered by checking the step-by-step guidance given in the third post of that thread, and seeing whether you did something different.

  24. Jason says:

    I opened up one secured loan for my father yesterday, $500 for 60 months, I just paid down $420. Am I doing the right steps? It now says “06/23/20 – $1.65”, so I don’t have to make any payment until 6/23/2020

    • NoonRadar says:

      Right, but if you want to show that there’s monthly payments on the loan you can set up a recurring ACH from another bank to the shared secure loan account, for instance whatever the unpaid balance is, divide it by 60 or 59, whatever nr of payments you have left. Either way schedule yourself a calendar event to look at the loan as it gets close to its last payments to make sure you pay the entire balance to zero.

  25. CGID says:

    Hi Jason. I suggest you get an account at the myFICO forum and ask your question on that thread. (The one that Chuck links to.) You will get help there. Have you read the step by step instructions — it’s post #3 on that thread.

  26. TG says:

    Odd, someone on myFICO says they got a loan approved within 2 days recently but I’m at 13 days with no response.

    • Chuck says:

      I also didn’t get a response. Haven’t had time to follow up yet.

    • NoonRadar says:

      It took mine a couple of phone calls also. If you have to call again try to get a support email address, makes it easier to follow up then having to explain your situation to the 1st level reps.

      In contrast to that, all my direct message questions from within Alliant have been answered timely and thoroughly.

    • CGID says:

      Largely the people reporting on the myFICO thread seem to be experiencing a short period of time between the initial loan application (online) and when they hear back from Alliant (typically an email asking when a loan officer can give them a call). Generally it has been 2-5 business days. (As far as I can tell.)

      But… a few people have reported much longer times (with Alliant eventually giving them a shout back).

      Two possible things that may be influencing this (aside from an applicant’s bad luck):

      (1) We had Labor Day recently. That’s one more business day add minimum, but in practice many individual employees in a wide variety of US businesses take the Friday before and/or the Tues afterward as vacation days (to make a nice long weekend), and I imagine the LOs at Alliant are no exception. So that would tend to extend the average response time by 2-3 business days.

      (2) I am guessing that there has been a big uptick in the number of people applying for this $500 SS loan product at Alliant, ever since DoC and Reddit started giving such high visibility. That will also cause response time to slow way down.

      If a person has not received a response in 10 business days (and as I say for simplicity I’d count Labor Day and the Friday before it as not business days) then I’d reach out to them by phone. I have been advising the folks on the MF thread to give the Alliant reps a lot of extra time right now, for the reasons stated above but also because I was really influenced by the advice given by DoC several months ago in their great article entitled “Don’t Call The Bank.” Still if it has been a really long time for somebody then perhaps a phone nudge is appropriate.

      • TG says:

        It just seems very random since the one clearly dated DP I see on myFICO shows the person signing up for an Alliant account, funding the account, applying for the loan, and getting approved via email all within the time period I applied for the loan without any response at all.

        • CGID says:

          Yup I agree. That’s why I added “an applicant’s bad luck” as the other factor. (I.e. random suckiness.) For example, maybe the way it works is that within two business days of the online application that app gets assigned to some particular LO. If that LO then goes on a vacation, or gets sick, or plain drops the ball and forgets to respond quickly, then that applicant will have a longer response time than if his app had been assigned to somebody else.

          My own personal advice is to wait 10-11 business days (counting Fri-Mon of LD Weekend as all non-business days) and then give them a friendly shout if you still have not heard anything.

          I had a very similar experience with a Bank of America CC application and the folks here on DoC all advised me to give them some extra time. They turned out to be right. I heard back a few days later.

          Best of luck….

  27. Jay S. says:

    As I never heard back from Alliant on my secured loan application, I called the loan agent.
    He shared with me that he would approve the loan of $500 at 3% interest rate and a tenure of 4 year.

    Is 3% their regular interest charge for this type of loan? I read that max tenure is 5 years but I guess 4 years is decent enough.

    • CGID says:

      I can’t remember what my rate was. It might have been 4% (?)

      As it turns out, the exact interest rate doesn’t matter, when you use the Technique as described — because you pay off almost all the principal early on. A 3% loan might involve paying $7 of interest during the total length of the loan — even if that was doubled to 6% it would still only be $14.

      Some people do get an LO that limits them to 4 years rather than 5. Kind of a roll of the dice, though most people simply get an LO who approves the 5-year $500 product as given.

  28. JASON says:

    The rate is 4% and total fee is a little above $50 including the interest. That being said, $550 to be paid off in 60 months, about $9-$10 per month.

  29. CGID says:

    The total interest comes to a lot less than $50 over the length of the loan when you are using the SSL technique as recommended.

    That is, you take out the loan, and then almost immediately you pay off most of the principal. That leaves you with $44 of principal on which you are paying interest, which at 4% comes to about $9 of interest over the entire 60 month period.

    • Logan says:

      Yep, this is pretty amazing for someone who didn’t previously have an open installment loan.

      Transunion fico went from 721 -> 750
      Experian fico went from 778 -> 811
      Still waiting on citi to update Equifax, but this clearly had a positive impact for me.

      • CGID says:

        Delighted to hear this worked out so well for you. Your roughly 30 point gain is normal for most folks.

        • Chuck says:

          Funny that I haven’t seen any gain at all, despite the fact that I never had non-revolving credit lines. I’m holding steady at ~780. Was hoping to bump over 800. Whatever 🙂

  30. Chuck says:

    I just saw a significant jump in my credit score (780 to 816). I’m guessing the secured loan trick just kicked in for me.

  31. Chuck says:

    Just realized I had forgotten to cancel my auto-pay! So it’s down to $32 now due to the past few auto-pays.. Had to call in to cancel, system couldn’t do it online.

    Luckily, I realized before it got paid off completely.

  32. jz says:

    Once you have the remaining balance of $45, i understand you don’t need to make any payments until the payment date indicated on the loan account. Once the scheduled/required payment date comes, i will need to make the required payment per the schedule until the whole load gets paid off. I can pay off the whole remaining balance any time, such as on the first required date, correct?

    Can anyone confirm my understanding? Thanks.

  33. MarcoPolo says:

    Thanks @Chuck for the write up.
    I wouldn’t have known about this trick but for your post here on DoC.
    Loan is something I lack on my credit report.
    Years ago when I was young and stupid, I bought my car paying the entire amount in cash.
    I am going to try this out but since five years is a very long period I would like to know if there is a way to automated the rest of the process i.e. after paying off the initial $420.
    Also, what happens between remaining $80 and leaving $45 ?
    When do you pay those $35?
    TIA

  34. Don says:

    Has anyone done this with a CU other than Alliant or America’s First CU (mentioned above in comments)? Thanks.

  35. jz says:

    how do I delete the autopay? In “Scheduled Transfer” section showing the future payment?

    In the account summary page, under “option”, there’s Manage Automatic Payment. When I click on it, it always gives me error message, Your loan is currently set up for automatic payment. If you wish to change or cancel the automatic payment, please call us at 800-328-1935 for assistance (Hours: Mon-Fri 7am-7pm CST).

    • jz says:

      just in case someone has the same question. You need to delete the future payment in “Scheduled Transfer” tab.

  36. Rook says:

    Does the original loan amount factor into total credit utilization calculations? That is to say if I had one $1000 maxed out credit card (100% utilization) and obtained a $500 secured loan that is nearly paid off; would I report as %50 total utilization (generally speaking) or would it still be considered max out because the loan amount doesn’t really factor in?

    • Chuck says:

      I’m not an expert on this, but I think the utilization is only for revolving loans like credit cards. Most other kinds of loans like mortgages and car loans don’t have a ‘max’ which you are partially utilizing, it’s just what you owe is what you owe.

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