Improving Credit history & coapplicants for a loan

vdinliMarch 20, 2007

I am trying to figure out if my credit history would be improved better by taking out a larger loan with a co-applicant or a smaller loan with just me as the applicant or it wouldn't make a difference at all. I am thinking of taking a loan only to improve my history and am capable and planning to pay it off early. Any inputs?

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dave_donhoff

Hi Vinudev_liny,

If you are talking about a closed-end loan, then the size is irrelevant to your scores. Take it small as you can functionally stand, and pay it consistently.

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner

    Bookmark   March 20, 2007 at 5:53PM
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Chemocurl zn5b/6a Indiana

Would possibly opening a credit card account accomplish the same purpose. I would think if you did, and then did not use it, or used it some and paid it off each month, that it would be a good thing.

I'm trying to think if there was any loan history on the recent report I pulled...I haven't had a loan in years, but was approved for a HELOC, which I have never used.
I was 'quite' pleased with my score.

Thoughts on a credit card instead?...anyone? It would save some interest over having a loan.

Sue

    Bookmark   March 20, 2007 at 6:12PM
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dave_donhoff

Hi Sue,
HERE is the "ultimate credit score" formula;

A) 2-4 installment accounts, never late
B) 3-5 revolving accounts, never late,
C) Revolving balances (seperately and combined) under 30% used,
D) Revolving accounts used at least once per 60 day period,
E) The higher the available revolving balance, the better,
F) The OLDER the revolving accounts, the better.

There are a brazillian ways to screw up your credit... but the 6 items above are about everything there is to having great credit.

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner

    Bookmark   March 20, 2007 at 8:10PM
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saphire

What if you have 12 open credit cards, most of which have not been used in 5 years?

Do you close them or leave them alone

    Bookmark   March 20, 2007 at 9:51PM
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dave_donhoff

Saphire,
Just leave them alone.
You're good.
Dave Donhoff
Strategic Equity & Mortgage Planner

    Bookmark   March 20, 2007 at 11:22PM
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saphire

Thanks. It always annoys me when I pull our credit reports that the credit cards I signed up for in 1992 prevent us from breaking 800. Also, I can never take advantage of all the store promotions because I am always thinking, if I get the bloomies card (which I will rarely if ever use anyway), it will lower my score 10 points!

I will be very excited when we finally buy that new house and I can forget about this nonsense since I do not plan to need credit after that

    Bookmark   March 20, 2007 at 11:31PM
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vdinli

Thanks Dave and Sue,
Yes, its a closed-end loan(had to figure out what that meant first!). So I guess I will go with the smaller loan and pay it off early. Is there a lower limit for borrowing below which it wouldn't make a difference to the credit score?
Sue, good point about credit cards saving on interest but I guess I need a revolving account and an installment account. I was planning on getting a card sometime after this loan goes through.
Thanks.

    Bookmark   March 21, 2007 at 11:38AM
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dave_donhoff

Hi Vinudev,

Is there a lower limit for borrowing below which it wouldn't make a difference to the credit score?

Nope... a $25 loan for computer parts at your local geek shop scores the same on your report as a $250,000 mortgage.

Just be on time ;~)
Dave Donhoff
Strategic Equity & Mortgage Planner

    Bookmark   March 22, 2007 at 4:23PM
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vdinli

Thanks for the clarification, Dave!

    Bookmark   March 22, 2007 at 9:59PM
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